Eurasian Economists Association

International Conference on Eurasian Economies

11-13 June 2019 – Famagusta, Turkish Republic of Northern Cyprus

Paper properties

Paper ID : 2293
Status : Paper published
Language : English
Topic : Macroeconomics
Presenter: Ph.D. Candidate Sera Şanlı
Session : 2A Growth

A Different Look at Cointegration Relationship between Quarterly Inflation Rates and Growth via Seasonal Integration Tests

Abstract

Detecting the direction of inflation-growth relationship has been a controversial issue in terms of the theoretical framework, notedly since the rise of Mundell-Tobin effect which is based upon the assumption of substitutability between money and capital. In this study, it has been aimed to investigate the cointegrating relationship and its direction between inflation and economic growth covering the period 1998Q1:2014Q4 for Turkey as grounded on the testing sequence that is illustrated by Ilmakunnas (1990) in order to handle unit root testing in a seasonal context by testing the appropriate order of differencing and concerns with the case where SI(2,1) (seasonally integrated of order (2,1)) is the maximum order of seasonal integration. It has been also utilized from ADF unit root test and DHF, HEGY & OCSB seasonal unit root tests in seasonal integration analysis. In the study, five cointegration regressions have been considered in the level, seasonally averaged, quarterly differenced, first differenced and twice differenced forms and two series have been found to have the same degree of seasonal integration as SI(1,1). Applying various residual tests have revealed the presence of a cointegrating relationship between two variables. In addition, the inflation-growth relationship in Turkey has been concluded to perform in an opposite direction.

JEL codes:

Şanlı, Sera, Özmen, Mehmet (2019). "A Different Look at Cointegration Relationship between Quarterly Inflation Rates and Growth via Seasonal Integration Tests" in Proceedings of International Conference of Eurasian Economies 2019, pp.45-55, Famagusta, Turkish Republic of Northern Cyprus.

DOI: https://doi.org/10.36880/C11.02293

Full paper in PDF format.

Session 2A: Growth

Eurasian Economists Association Beykent University Eastern Mediterranean University Kyrgyzstan-Turkey Manas University TIKA Central Bank of TRNC