Perspectives on High Real Interest Rates in Turkey

33 Pages Posted: 18 Dec 2008

See all articles by Prakash Kannan

Prakash Kannan

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2008

Abstract

The Turkish economy is typically characterized as having particularly high real interest rates. Fundamental considerations, such as high growth rates or high returns to capital, do not provide a satisfactory resolution of this puzzle. Instead, we find that two other factors - doubts about the sustainability of disinflation and the existence of a risk premium - have a significant impact on the level of real interest rates in Turkey. Importantly, fiscal policy variables are shown to affect both these factors, suggesting that a more credible and prudent fiscal policy can help reduce real interest rates in Turkey.

Keywords: Interest rates, Turkey, Risk premium, Disinflation, Fiscal policy, Foreign exchange, Capital, Economic models

Suggested Citation

Kannan, Prakash, Perspectives on High Real Interest Rates in Turkey (October 2008). IMF Working Papers, Vol. , pp. 1-31, 2008. Available at SSRN: https://ssrn.com/abstract=1316719

Prakash Kannan (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
(202)623-8806 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
85
Abstract Views
615
rank
217,803
PlumX Metrics