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The Analysis of Convergence of Inflation Rates of Goods and Services with General Inflation Rates in the Turkish Economy

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  • Melike Ecem Sertbaş

    (İstanbul Üniversitesi, Sosyal Bilimler Enstitüsü, Ekonometri Anabilim Dalı, İstanbul, Türkiye.)

Abstract

The purpose of this study is to test whether the inflation rates of the 12 goods and services group classified by the Turkish Statistical Institute (Food and Soft Drinks, Alcoholic Beverages and Tobacco, Clothing and Footwear, Housing, Water, Electricity, Gas and Other Fuels, Furniture, Home Appliances and Home Care Services, Health, Transport, Communication, Entertainment and Culture, Education, Restaurants and Hotels and Various Goods and Services), converge with general inflation rates. In line with this, the Kruse (2011) unit root test and the Hepsağ (2019) unit root test, which considers structural breaks and nonlinearity were applied to the monthly inflation data covering the periods 2003: 02 2019: 03. As a result of the empirical analysis, while the convergence hypothesis was not valid for the Kruse (2011) test for any of the goods and services groups; only Furniture, Home Appliances and Home Care Services converged with the general inflation rates out of the 12 goods and services groups; it is concluded that there is no convergence in other goods and service groups according to the Hepsağ (2019) test. According to these results, it is concluded that the monetary policies applied are not reflected in the prices of goods and services in general and the policies implemented are not successful.

Suggested Citation

  • Melike Ecem Sertbaş, 2019. "The Analysis of Convergence of Inflation Rates of Goods and Services with General Inflation Rates in the Turkish Economy," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 30(0), pages 21-31, June.
    • Handle: RePEc:ist:ekoist:v:30:y:2019:i:0:p:21-31
    DOI: 10.26650/ekoist.2018.30.0008
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    References listed on IDEAS

    as
    1. Lopez, Claude & Papell, David H., 2012. "Convergence of Euro area inflation rates," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1440-1458.
    2. Robinson Kruse, 2011. "A new unit root test against ESTAR based on a class of modified statistics," Statistical Papers, Springer, vol. 52(1), pages 71-85, February.
    3. Fabio Busetti & Lorenzo Forni & Andrew Harvey & Fabrizio Venditti, 2007. "Inflation Convergence and Divergence within the European Monetary Union," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 95-121, June.
    4. Kocenda, Evzen & Papell, David H, 1997. "Inflation Convergence within the European Union: A Panel Data Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 189-198, July.
    5. Mentz, Markus & Sebastian, Steffen P., 2003. "Inflation convergence after the introduction of the Euro," CFS Working Paper Series 2003/30, Center for Financial Studies (CFS).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation Convergence; Monetary Policy; Unit Root Tests; Structural Break; Nonlinearity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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