Inflation Threshold Effect on Economic Growth in Turkey

  • Ömer ESEN Muş Alparslan University Muş, Turkey
  • Celil AYDIN Muş Alparslan University Muş, Turkey
  • Recai AYDIN Social Sciences University of Ankara, Ankara,Turkey

Abstract

In this study, the role of inflation threshold effect on economic growth has been investigated for Turkey in the 2002:Q1 – 2015:Q1 period. At the first stage, inflation threshold value has been detected. After that, inflation-economic growth relation has been examined using threshold autoregressive (TAR) model. Results indicate that there is a nonlinear relationship between inflation and growth rate; the threshold for the influence of inflation on economic growth is 8.89%; and an inflation rate above this threshold has a negative influence on economic growth while an inflation rate below this threshold has a positive influence on economic growth. In this regard, it is important to achieve sustainable growth, which plays a crucial role in increasing the efficiency of implemented monetary policies and assuring stability. Therefore, political and economic decision-makers should not ignore the concept of threshold within the scope of monetary policy while determining the target inflation rate in their efforts to deal with inflation.

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Published
2017-05-10
How to Cite
ESEN, Ömer; AYDIN, Celil; AYDIN, Recai. Inflation Threshold Effect on Economic Growth in Turkey. Journal of Advanced Research in Law and Economics, [S.l.], v. 7, n. 8, p. 1983-1993, may 2017. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/1004>. Date accessed: 14 apr. 2024.