Price-Money Relationship After Inflation Targeting: Cointegration Test With Structural Breaks For Turkey and Brazil

Authors

  • Cuneyt Dumrul Erciyes University
  • Yasemin Dumrul Erciyes University

Abstract

The inflation targeting (IT) strategy may create structural changes in macroeconomic variables. This study analyzes the effect of the IT strategy on the price-money supply relationship in Turkey and Brazil by Kejriwal-Perron cointegration analysis with structural breaks. The analysis aims to determine whether the IT strategy leads to regime shifts in the price index-money supply relationship in Turkey and Brazil. The Kejriwal-Perron tests reveal a structural break in the price-money supply relationship as a result of the IT strategy. In both countries, the implementation of this strategy leads to a decrease in the regime coefficients for Turkey while it creates an increase for Brazil. When Turkey and Brazil are compared in terms of money-price relationship after the IT strategy, the study reveals that it has weakened more in Brazil.

Keywords: Monetary Inflation; Inflation Targeting; Kejriwal-Perron Cointegration Analysis; Regime Shifts.

JEL Classifications: C32; E51; E52; E58

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Published

2015-07-15

How to Cite

Dumrul, C., & Dumrul, Y. (2015). Price-Money Relationship After Inflation Targeting: Cointegration Test With Structural Breaks For Turkey and Brazil. International Journal of Economics and Financial Issues, 5(3), 701–708. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/1161

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