İktisadi ve İdari Bilimler Fakültesi

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Browsing İktisadi ve İdari Bilimler Fakültesi by Subject "Aggregate Instability"

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    Testing for Aggregate Instability in an Open Economy
    (Bogazici Universitesi, 2022) Yılmaz, Y.Ö.; Yılmaz, Yusuf Ömür; 04.01. Department of Economics / İktisat Bölümü; 04. Faculty of Economics and Administrative Sciences / İktisadi ve İdari Bilimler Fakültesi; 01. Mardin Artuklu University / Mardin Artuklu Üniversitesi
    This paper empirically tests the Turkish economy’s stability between 2010 and 2016 using a small open economy New-Keynesian model featuring a positive long-run inflation rate and sunspot shock under alternative monetary policy rules. We found that the probabilities of indeterminacy are very close to unity. We can thus conclude that the economy is unstable over this period primarily because the long-run inflation rate is in the higher single digits despite the Central Bank’s weak response to inflation. This drove the economy into aggregate instability. © 2022 Bogazici Universitesi. All rights reserved.