Does Inflation Depress Economic Growth? Evidence from Turkey

Abstract

In this study, the relationship between the inflation and the economic growth in Turkey has been examined in the framework of data covering 1987:1-2006:3 periods. The existence of the long term relationship between these two variables has been examined using Bound Test developed by Pesaran et al. (2001), and the existence of a cointegration relationship between the two series has been detected following the test result. Whereas no statistically significant long term relationship has been found with the formed ARDL models, a negative and statistically significant short term relationship has been found. The causality relationship between the two series has been examined in the framework of the causality test developed by Toda Yamamoto (1995). Whereas no causality relationship has been found from inflation to economic growth, a causality relationship has been found from economic growth to inflation.

Keywords: Economic Growth, Inflation, Cointegration, Bound Test, Toda Yamamoto Causality

JEL Classification: C32, F10, F32