A TEST FOR ASYMMETRIC CENTRAL BANK PREFERENCES IN TURKEY

Abstract

The time inconsistency based KPBG models that tried to explain the inflation bias lost their popularity as inconsistent Central Bank behaviors changed in time. However, high inflation for countries like Turkey is still a problem and a new theory to explain this ‘time consistent’ inflation bias is in need. A theory based on non-linear or asymmetric Central Bank behavior is developed during the last decade to fill this gap. One way to test the empirical validity of the theorem is based on a Taylor Rule variant asymmetric model. This model is tested here for Turkey as it is one of the inflation targeting countries roughly for the last ten years

Keywords

• asymmetric preferences, inflation bias, policy targets, central bank

Kaynakça

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