“The Relationship Between Inflation and the Budget Deficit in Turkey”

“For Turkey, Metin (1995) analyzed inflation using a general framework of sectoral relationships and found that fiscal expansion was a determining factor for inflation. The excess demand for money affected inflation positively, but only in the short run. On the other hand, imported inflation, the excess demand for goods, and the excess demand for assets in the capital markets had little or no effect on inflation. A key policy implication of Metin (1995) is that Turkish inflation could be reduced rapidly by eliminating the budget deficit. The aforementioned general literature influences the current study, which builds directly on Metin (1995). The large public sector budget deficits and the relatively high inflation in Turkey during the last four decades have sparked debate on their consequences for the Turkish economy. The main question is whether bond-financed deficits are inflationary or whether only monetized deficits are inflationary. To answer this question, this article investigates the relationship between Turkish inflation and budget deficits over 1950-1987. Although the government shifted from monetizing the deficit to bond financing in the mid-1980s, the short annual sample on Treasury bonds precluded sorting out the effects of this alternative means of deficit financing.” Read more.

I am unable to currently find the Metin 1995 article. Citation information for it is below.

“An Integrated Analysis of Turkish Inflation”

Kivilcim Metin

Oxford Bulletin of Economics and Statistics, 57, pp. 513-533.