Inflation and Economic Growth: A Dynamic Panel Threshold Analysis for Turkish Republics in Transition Process

Abstract

This study investigates the influence of inflation on economic growth for five Turkish Republics (Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan, and Turkmenistan) that are in the transition period through dynamic panel data analysis based on threshold. Study results indicate that there is a nonlinear relationship between inflation and growth rate; the threshold for the influence of inflation on economic growth is 7.97%, and an inflation rate above this threshold has a negative influence on economic growth while an inflation rate below this threshold has a positive influence on economic growth. These results show that a high inflation rate will have a considerable influence on economic growth. In this regard, it is important to achieve sustainable growth which plays a crucial role in increasing the efficiency of implemented monetary policies and assuring stability. Therefore, political and economic decision-makers in transition economies do not ignore the concept of threshold within the scope of monetary policy while determining the target inflation rate in their efforts to deal with inflation. (C) 2016 The Authors. Published by Elseivier Ltd.