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The paper analyses the structural causes of the recent Turkish
inflationary episode. It is argued that monetary policies based on
credit tightening alone are not likely to yield the desired target of
price stabilisation. Instead. it is hypothesised that the underlying
sources of price inflation are affected by income inequality and
conflicting claims on national output; and that excessive credit
expansion serves mainly to accommodate the inertial inflation thereby
originated in the real sector. Given this hypothesis. the paper employs
a computable general equilibrium model to investigate four distinct
sources of structural inflation for the Turkish economy: (i) the
profit/rent inflation based on monopolistic mark-Ups over prime costs;
(ii) imported inflation due to the import-dependent structure of the
domestic industry; (iii) cost-push and demand inflation due to urban
wage claims; and (iv) inflation that results from the fiscal pressures
of the government's budget deficits. The general equilibrium model is in
the Keynesian tradition in determining the production level by aggregate
demand constraints. Furthermore. it accommodates oligopolistic mark-up
rules and working capital expenses for price determination. and nominal
wage fixity to determine the level of employment. The general
equilibrium analysis of the macro economy suggests that. over the
analysed period. conflicting claims of various social classes on
national output and conflicting rates of intersectoral accumulation
warranted by competing producer groups have become important sources of
disequilibria in the domestic economy; and that the distributional
conflict among socio-economic classes had a direct impact on the
formation of price movements.

AbstractThis paper studies the new monetary stance of the Central Bank of Republic of Turkey (CBRT) during the Great Recession. We note that characteristics of the post-1997 "Great Moderation" revealed interest rate smoothing as a valid policy option for the inflation targeting central banks. Utilizing econometric analysis on a general form of a Taylor Rule, we search for the relative weights of the objective function of the CBRT over Jan 2010–Dec 2013. We find that over the Great Recession, the CBRT's focus on "interest smoothing" had been maintained; and yet the burden of adjustment fell disproportionately on the foreign exchange markets. Furthermore, weak credibility of the CBRT, lack of a simple policy rule, and noisy policy communications evidence that pre-requisites of the interest rate smoothing are not being fulfilled. Inevitable sharp policy corrections that follow smoothing periods proved insufficient against the voluminous global flows.

With the aid of an intertemporal, multi-region general equilibrium model, the authors study issues of agricultural trade liberalization, growth and capital accumulation in the context of a world economy moving towards a multi-polar structure. They specifically focus on Turkey, the European Union, the Middle East, and the Economies in Transition; and study alternative scenarios of formation of customs unions and increased trade orientation. The model is based on intertemporal general equilibrium theory with Ramsey-type dynamics. The world economy is fully endogenized within a 9-region specification, with Turkey, EU, Middle East and the Transition Economies constituting as one of the indigenous regions. A key feature of the model is its explicit recognition of both the commodity and foreign capital flows across regions in an endogenous setting, and its explicit portrayal of the out-of-steady state dynamics under an intertemporal optimization framework. They explore the short- versus the long-run economic impacts of alternative trade and investment policies on agricultural production, foreign trade, resource allocation, accumulation, consumer welfare, and income distribution in the regions of analyis. The results reveal significant gains from increased bilateral trade between the identified regions, and further underscore the crucial importance of financing commodity trade deficits in sustaining the accumulation patterns. ; IFPRI4 ; TMD ; Non-PR

With the aid of an intertemporal, multi-region general equilibrium model, the authors study issues of agricultural trade liberalization, growth and capital accumulation in the context of a world economy moving towards a multi-polar structure. They specifically focus on Turkey, the European Union, the Middle East, and the Economies in Transition; and study alternative scenarios of formation of customs unions and increased trade orientation. The model is based on intertemporal general equilibrium theory with Ramsey-type dynamics. The world economy is fully endogenized within a 9-region specification, with Turkey, EU, Middle East and the Transition Economies constituting as one of the indigenous regions. A key feature of the model is its explicit recognition of both the commodity and foreign capital flows across regions in an endogenous setting, and its explicit portrayal of the out-of-steady state dynamics under an intertemporal optimization framework. They explore the short- versus the long-run economic impacts of alternative trade and investment policies on agricultural production, foreign trade, resource allocation, accumulation, consumer welfare, and income distribution in the regions of analyis. The results reveal significant gains from increased bilateral trade between the identified regions, and further underscore the crucial importance of financing commodity trade deficits in sustaining the accumulation patterns. ; Non-PR ; IFPRI1 ; TMD