Comparing Equation of Exchange and Wage-Cost Mark-up Identity for Turkish Economy

Rahmi Yamak
Havvanur Feyza Erdem
Fatma Kolcu
JEL codes: 
C12 - Hypothesis Testing: General, C52 - Model Evaluation, Validation, and Selection, E12 - Keynes; Keynesian; Post-Keynesian, E13 - Neoclassical.
In economic literature, Monetarists have argued that money growth over transactions growth would exactly cause the same growth in the price level. In contrast, Weintraub, one of the leading economists of the Post Keynesian School has believed that the effect of the money supply on the price level is not direct. The aim of this study is to empirically investigate and to compare the arguments of Monetarists and Post Keynesians on the inflation for the case of Turkey. The data used in the study are annual and cover the period of 1990-2013. In this study, the equations implied by both Schools were compared to each other in terms of their predictive powers, their statistical robustness and the validity of the hypotheses provided by them. In a result, strong support was found for WCMI especially in terms of its predictive power.
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