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Monetary policy in high inflation open economies: evidence from Israel and Turkey

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  • Sushanta K. Mallick

    (School of Business and Management, Queen Mary, University of London, Mile End Road, London E1 4NS, UK)

  • Mohammed Mohsin

    (Department of Economics, University of Tennessee, 514 Stokely Management Center, Knoxville, TN 37996, USA)

Abstract

With quarterly data from Israel and Turkey we estimate generalized impulse response functions to show that inflation has no long-run real effects on consumption, investment and the current account balance. The findings are robust even after allowing for inflation volatility obtained through GARCH estimates. We develop an inter-temporal optimizing model of a small open economy with a fixed rate of time preference that supports the empirics. Our model, thus, extends the super-neutrality results (à la Sidrausky) in an open economy paradigm. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Sushanta K. Mallick & Mohammed Mohsin, 2007. "Monetary policy in high inflation open economies: evidence from Israel and Turkey," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 405-415.
    • Handle: RePEc:ijf:ijfiec:v:12:y:2007:i:4:p:405-415
    DOI: 10.1002/ijfe.324
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    References listed on IDEAS

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    Cited by:

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    2. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel Abidin Ozdemir, 2014. "Fiscal Policy Shocks and the Dynamics of Asset Prices," Public Finance Review, , vol. 42(4), pages 511-531, July.
    3. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel A. Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working Papers 201228, University of Pretoria, Department of Economics.
    4. Caporale, Guglielmo Maria & Sousa, Ricardo M., 2016. "Consumption, wealth, stock and housing returns: Evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 36(C), pages 562-578.
    5. Luca Agnello & Ricardo M. Sousa, 2013. "Fiscal Policy And Asset Prices," Bulletin of Economic Research, Wiley Blackwell, vol. 65(2), pages 154-177, April.
    6. Peltonen, Tuomas A. & Sousa, Ricardo M. & Vansteenkiste, Isabel S., 2012. "Wealth effects in emerging market economies," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 155-166.
    7. Agnello, Luca & Castro, Vítor & Sousa, Ricardo M., 2012. "How does fiscal policy react to wealth composition and asset prices?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 874-890.
    8. Rangan Gupta & Charl Jooste & Kanyane Matlou, 2014. "A time-varying approach to analysing fiscal policy and asset prices in South Africa," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 6(1), pages 46-63, April.
    9. Afonso, António & Sousa, Ricardo M., 2011. "What are the effects of fiscal policy on asset markets?," Economic Modelling, Elsevier, vol. 28(4), pages 1871-1890, July.
    10. Alexander Zimper, 2014. "The minimal confidence levels of Basel capital regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 15(2), pages 129-143, April.

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