Central Bank transparency and inflation targeting: A policy performance analysis for Turkey

Year 2017, Volume: 3 Issue: 2, 467 - 474, 01.02.2017

Emine Özge Yurdakurban Umut Öneş

https://doi.org/10.24289/ijsser.282585

Abstract

In the wake of recent global financial crisis, growing
emphasis has been put on central bank reliability and transparency, especially
for the developing countries. In our paper, we built a macroeconomic model to
test the impact of central bank reliability on the inflation targeting
performance by the bank. To this end, we utilized the indexes developed by
Cukierman et.al.(1993); and Dinçer and Eigenberg (2013) to calculate a measure
of Turkish Central Bank reliability for the past two decades, and ran a multi-equation
time series regression to analyze the effect of institutional independence and transparency
on inflation targeting performance, while controlling for other macroeconomic
indicators that impact inflation. We found that higher degrees of perceived transparency
of the central bank has a positive effect on the inflation targeting performance.
Also, transparency seems to be a better proxy for the overall institutional
change the Turkish economy experienced in the last two decades.

Keywords

inflation targeting, central bank transparency, central bank independence, policy performance analysis

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