The effect of inflation and inflation uncertainty on the growth: The case of Turkey

Inflation is one of the most important economic problems that countries have to struggle with. While inflation is a problem in itself, inflation uncertainty is another issue that needs to be examined in terms of its effects. Inflation uncertainty, which is an important indicator of price stability, affects financial and monetary policy variables as well as variables on the real market for economic growth. Especially inflation is one of the most important economic problems experienced by developing countries. In countries that have problems with inflation, it is important to investigate the interactions of inflation uncertainty and real and nominal economic magnitudes in terms of shaping economic policy. Turkey's economy has been faced with double-digit inflation figures since the 1970s. In 2001, the law, which makes price stability the main objective of monetary policy, was amenden. Notwithstanding, Turkey's economy has not reached success in the fight against high inflation. The reason for the continuation of a long struggle that Turkey's inflation is inflation increase and inflation uncertainty. For this purpose, between 2005:4-2019:1, the effect of inflation and inflation uncertainty on growth was investigated and it is aimed to contribute to the related literatüre. In his study, the dynamic relationships between inflation and inflation uncertainty on growth were analyzed by analyzing the series obtained from VARMA-MGARCH-BEKK forecasts. Two important findings appeared from this study. Firstly, it was concluded that the Cukierman-Meltzer hypothesis was supported by Turkey according to the effect of inflation uncertainty on inflation. The second is supported by the Black Hypothesis, where inflation uncertainty has a positive impact on growth.