Browsing by Author "Yilmaz, Yusuf Omur"

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A Case Against Average Inflation Targeting
(Routledge Journals, Taylor & Francis Ltd, 2025) Yilmaz, Yusuf Omur
Well-anchored inflation rate below a constant inflation target rate of 2% leads policymakers to seek make-up policies, including Average Inflation Targeting, Price Level Targeting, etc. In light of this, this article mainly aims to find out which policy rule - Average Inflation Targeting, Constant Inflation Targeting and Price Level Targeting - provides better macroeconomic performances at lower interest rates. Average Inflation Targeting policy is welfare improving against the Constant Inflation Targeting, but not Price Level Targeting. We conclude that a comparative application of the Price Level Targeting produces better macroeconomic performances, despite some weaknesses. We also discuss the source of the latest US inflation rate surge, and find that the design of the average inflation targeting policy can be responsible for extra inflation rate volatility.
The Macroeconomic Effects of Positive Trend Inflation in a Small Open Economy
(Routledge Journals, Taylor & Francis Ltd, 2022) Yilmaz, Yusuf Omur; Yılmaz, Yusuf Ömür; Tunc, Gul Ipek
The existing New Keynesian open economy literature tends to make the simplifying assumption that there is no trend inflation. In this paper, we reformulate the standard open economy model to account for positive trend inflation. We then employ the model to understand the effects of macroeconomic shocks in a small open economy when trend inflation is positive. Our main finding is that allowing for trend inflation significantly affects the dynamics of the model through real exchange rate dynamics rather than the slope of the New Keynesian Philips Curve. Specifically, higher trend inflation induces modestly more persistent real exchange rates' responses to the shocks. Further incorporation of trend inflation in an open economy enables us to discuss the Purchasing Power Parity and Delayed Overshooting Puzzles.
Misspecified expectations in an open economy
(Elsevier, 2024) Yılmaz, Yusuf Ömür; Cicekci, Cumhur
In the past two decades, Turkey has experienced multiple changes in its monetary policy regime.To analyse how these policy changes affect the behaviours of households and firms, somebehavioural parameters are incorporated into a small open economy New Keynesian model. Ourapproach consists of four phases. First, we assess the impacts of the behavioural parameters onthe model and find that higher values of the parameters increase the effects of expectationson the model. Second, for the period between 2006 and 2021, the model is estimated for theTurkish economy and the findings show that both households and firms are more forward-looking in their decision making. Moreover, the current variables have a weak effect on thenominal interest rate, and the inertial nominal interest rate has a strong effect on it. Third, weanalyse the evolution of the model parameters over the period and find that the behaviouralparameters tend to increase, while the monetary policy becomes more inertial. Finally, weconclude that the Central Bank should follow Domestic Inflation-based Taylor rule to minimise welfare loss