The relationship between inflation and economic growth: An econometric application for Turkey

In this study, the interaction between inflation and economic growth for Turkey is analysed. The aim is to provide empirical support for developing proper economic policies on relationship between inflation and economic growth in Turkish economy that desire to catch sustainable high growth rate and stable price for 2023 targets. In this study, the data sets of World Bank which include growth rate calculated from real GDP, inflation rate calculated from CPI, and gross capital formation ratio, for period of 1961-2016, are used. In order to determine time series property of variables, ADF, PP, KPSS and Zivot Andrews structural unit root tests are applied. According to the results of unit root tests, it is seen that some of the variables are stationary while others are non-stationary. In this contest it is decided that the most suitable method for this study is ARDL. According to the result of ARDL model, there is a inverse relationship between inflation and growth in both short and long term for a given period in Turkey.