Abstract
This paper firstly discusses the impact of inflation on real output in different theoretical models and then investigates this impact empirically in an economy facing persistent high inflation. We find some evidence of Sidrauski’s (Am Econ Rev 57:534–544, 1967) superneutrality of money for Turkey in the long run. However, it seems that inflation affects real output negatively in the short run. These results are more compatible with a class of utility functions in which real money balances and consumption are perfect complements as Asako (Econometrica 51(5):1593–1596, 1983) elucidates.
Similar content being viewed by others
References
Abel A (1983) Optimal investment under uncertainty. Am Econ Rev 73:228–233
Asako K (1983) The utility function and the superneutrality of money on the transition path. Econometrica 51(5):1593–1596
Barro RJ (1995) Inflation and growth. Bank Engl Q Bull 35(2):166–76
Blanchard O, Quah D (1989) The dynamic effects of aggregate demand and supply disturbances. Am Econ Rev 79(4):655–673
Bruno M, Easterly W (1998) Inflation crises and long-run growth. J Monet Econ 41:3–26
Bullard J, Keating JW (1995) The long-run relationship between inflation and output in postwar economies. J Monet Econ 36(December):477–496
Cameron N, Hum D, Simpson W (1996) Stylized facts and stylized illusions: inflation and productivity revisited. Can J Econ 29:152–162
Chari V, Jones LE, Manuelli RE (1996) Inflation, growth, and financial intermediation. Fed Reserv Bank St Louis Rev 78(3):41–58
Craine R (1989) Risky business: the allocation of capital. J Monet Econ 23:201–218
Crowder WJ (1998) The long-run relation between money growth and infation. Econ Inq 36(2):229–243
Domaç İ (2004) Explaining and forecasting inflation in Turkey, world bank policy research working paper 3287
Dotsey M, Sarte P (2000) Inflation uncertainty and growth in a cash-in-advance economy. J Monet Econ 45:631–655
Faria JR, Carneiro FG (2001) Does inflation affect growth in the long and short run? J Appl Econ 4(1):89–105
Fischer S (1979) Capital accumulation on the transition path in a monetary optimizing model. Econometrica 47:1433–39
Fischer S (1993) The role of macroeconomic factors in economic growth. J Monet Econ 32(3):485–512
Friedman M (1977) Nobel lecture: inflation and unemployment. J Polit Econ 85:451–472
Gillman M, Kejak M (2004) The demand for bank reserves and other monetary aggregates. Econ Inq 42(3):518–533
Gillman M, Kejak M (2005) Contrasting models of the effect of inflation on growth. J Econ Surv 19(1):113–136
Gillman M, Harris M, Matyas L (2004) Inflation and growth: explaining a negative effect. Empir Econ 29(1):149–167
Gomme P (1993) Money and growth: revisited: measuring the costs of inflation in an endogenous growth model. J Monet Econ 32:51–77
Gylfason T, Herbertsson T (2001) Does inflation matter for growth? Jpn World Econ 13(4):405–428
Ireland P (1994) Money and growth: an alternative approach. Am Econ Rev 55:1–14
Khan S, Senhadji A (2001) Threshold effects in the relationship between inflation and growth. IMF Staff Pap 48(1):1–21
Kibritçioğlu A (2002) Causes of inflation in Turkey: a literature survey with special reference to theories of inflation. In: Kibritçioğlu A, Rittenberg L, Selçuk F (eds) Inflation and disinflation. Aldershot: Ashgate, 43–76
King RG, Watson MW (1997) Testing long-run neutrality. Federal Reserve Bank Richmond Econ Q 83(3)
Levine R, Renelt D (1992) A sensitivity analysis of cross-country growth regressions. Am Econ Rev 82(4):942–63
Lucas JRE (1973) Some international evidence on output inflation trade-offs. Am Econ Rev 63:326–34
Lucas RE (1980) Equilibrium in a pure currency economy. Econ Inq 18(2):203–220
Sarel M (1996) Nonlinear effects of inflation on economic growth. IMF Staff Pap 43(1):199–215
Sidrauski M (1967) Rational choice and patterns of growth in a monetary economy. Am Econ Rev 57:534–544
Stockman AC (1981) Anticipated inflation and the capital stock in a cash-in-advance economy. J Monet Econ 8:387–93
Tobin J (1965) Money and economic growth. Econometrica 33(October):671–684
Wang P, Yip CK (1992) Alternative approaches to money and growth. J Money Credit Bank 24:553–562
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Yilmaz, E. Inflation and output in the long and short run in Turkey. Empirica 37, 253–269 (2010). https://doi.org/10.1007/s10663-009-9106-7
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10663-009-9106-7