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Analysis Of The Relationship Between Inflation, Budget Deficit And Money Supply In Turkey By Ardl Approach: 1980-2017

Author

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  • Begüm ERDÄ°L ÅžAHÄ°N

    (İstanbul Kültür University)

Abstract

Inflation is considered as a monetary phenomenon and its increase is linked with money supply according to the Monetarist view. In other words, the increase in budget deficits leads to an increase in money supply and as a result, inflation rates rise. Inflation is based on fiscal policies rather than monetary policies according to Price Level Fiscal Theory. Accordingly, increasing budget deficits leads to increases in loans, thus causes interest rates to rise and consequently inflation rises as money supply increases. In this study, the relationship between inflation, budget deficit and moneysupply in Turkey is analyzed using the ARDL bounds testing approach for the 1980-2017 period. According to the empirical results, there was a positive and significant relationship between inflation and budget deficit both in the long and short term.

Suggested Citation

  • Begüm ERDÄ°L ÅžAHÄ°N, 2019. "Analysis Of The Relationship Between Inflation, Budget Deficit And Money Supply In Turkey By Ardl Approach: 1980-2017," JOURNAL OF LIFE ECONOMICS, Holistence Publications, vol. 6(3), pages 297-306, July.
    • Handle: RePEc:jle:journl:v:6:y:2019:i:3:p:297-306
    DOI: 10.15637/jlecon.6.018
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    More about this item

    Keywords

    Inflation; Deficit; Money Supply; Turkey; ARDL;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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