Inflation Targeting in Turkey

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  • 1 January 2008
    • preprint
      • Published in RePEc
Abstract
In the aftermath of the 2000-2001crisis the banking sector in Turkey was in turbulence requiring immediate action. The rescue operation sky-rocketed the public debt-to-gross domestic product ratio. The fiscal dominance caused by high public debt put a severe constraint on the conduct of monetary policy. Other challenges were the high exchange rate pass-through, inflation inertia, and the weak banking sector. This paper provides an account of the monetary policy experience of Turkey after the crisis. It focuses on the reasons behind adopting informal inflation targeting, i.e. a transition phase, before moving into formal inflation targeting in 2006.
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