THE INFLATION DYNAMICS OF THE TURKISH ECONOMY IN 1990-2011 PERIOD

In 2004, turkey managed to reduce the chronic high inflation rates that characterized its economy over the period 1975-2001 to single digits, thanks to economic policies implemented in the aftermath of the 2001 financial crisis. this paper analyzes inflation dynamics in the turkish economy both in the short- and the long-run, over the period january 1990 to december 2011 by using the johansen cointegration test and the vector error correction model (vec). empirical results show that the inflation rates in turkey are mainly related to changes in money supply, economic growth, nominal exchange rates, dollarization and real wages.