E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)Return

Uncertainty is one of the most important issues for economic actors. Uncertainty about tax, expenditure and debt policy has an impact on the economy. The central question in this study asks how fiscal policy uncertainty affects the Turkish economy. First, we quantify Turkey's fiscal policy uncertainty index based on volatility measurements between 1998Q1 and 2020Q4. This index represents major fiscal, economic and political incidents in Turkey. Next, we analyse the effects of fiscal policy uncertainty on the Turkish economy using a VAR model. Our study finds that fiscal policy uncertainty shocks have detrimental and long-lasting effects on the Turkish economy. The results indicated that a positive standard deviation shock in fiscal policy uncertainty decreases the confidence, output and consumption. The findings of this study reveal critical fiscal policy implications for decision-makers. These findings imply that reducing Turkey's fiscal policy uncertainty is a critical policy priority for the business cycle fluctuations.

We analyse the economic impact of the economic recession caused by the unprecedented COVID-19 pandemic by estimating the amplitude, duration and scope of influence of the recession. We employ the turning point method to extract the characteristics of the historical recessions since 1980 in 153 countries and use the information to obtain the distribution characteristics of the GDP growth rate in these countries during the current pandemic-induced recession with Monte Carlo simulation. We then make judgment on the scope of influence of this pandemic-induced recession by investigating the co-movement relationship between the historical recessions in the 153 countries. The results show that this pandemic-induced recession is likely to be a severe global recession. The mean of the average simulated ΔGDP of the 153 countries will plunge into a trough at -1.16% in 2020 with a recession amplitude of approximately 4.50% and recover to the pre-crisis level of 3.29% in 2023.

This paper presents a theoretical model that is suitable for the analysis of price-setting hetero-geneity in a small open economy. The model is based on Benigno and López-Salido's (2006) work and is one of many examples of a dynamic stochastic general equilibrium (DSGE) model that utilizes heterogeneous price stickiness (e.g., Aoki, 2001; Bodenstein et al., 2008). The model allows analyses of a small open economy by extending the existing multisector models using the mechanisms described by Galí and Monacelli (2005). As a result, the model enables monetary policy analyses that take into account existing sectoral differences in the price-setting mechanisms found in an open economy. In the empirical part of the paper, the model is estimated on data for Poland using Bayesian techniques. The results show that the period 1999-2017 saw significant differences in price stickiness and inflation persistence in the sectors that produce food and energy compared with sectors that produce other goods and services.

The paper examines the hysteresis hypothesis in unemployment in the case of eight selected countries in transition, using the Kalman filter and testing whether the NAIRU time series are stationary. The empirical results show that the hysteresis effect is confirmed for the majority of the countries. Testing the influence of the inflation growth rate on the decline in the NAIRU and vice versa, performed using the panel regression with fixed effect, confirmed that the increase in inflation leads to decline in the NAIRU. The conclusion also suggests the existence of the impact of actual unemployment rate on the NAIRU, which may be affected by the change in aggregate demand.

The paper examines development of economic balance and efficiency of monetary and fiscal policy in the Czech Republic and Slovakia during the crisis with the help of empirical verification of Robert Mundell's model of effective market classification. Our main findings show that although there was no direct 'loser' during the crisis, the Czech Republic seemed to have better coped with its economic imbalances due to the independence of its monetary policy. Slovakia, on the contrary, has preserved several problems on the side of external balance. However, as both countries show certain differences, it is impossible to assess whether the euro adoption had the same effect on both of them. In general, the paper contributes to the research on the Czech and Slovak economy and euro area membership.

This paper analyses the process of nominal and real convergence of the new Member States of the European Union. It also discusses theoretical and methodological issues relating to this process. The importance of nominal and real convergence is underlined in connection with a successful catching-up. The EU-10 economies experienced robust economic growth in recent years, which had a positive impact on the convergence process. Although this favourable development of real convergence (GDP per capita in PPS) is accompanied by a simultaneous price (nominal) convergence (changes in relative prices and a convergence of price levels), the comparative price level is still biased towards lower level in comparison with the per capita income.

This paper examines sustainability of current account for Turkey during the period 1987:Q1 - 2002:Q4. Using the usual intertemporal borrowing constraint, I have tested for a long-run relationship between Turkey exports and imports (measured in real terms to real gross domestic product) using quarterly data. In my empirical analysis of the sustainability of current account for Turkey, cointegration approaches have been used. Empirical results suggest that there exists a unique long-run or equilibrium relationship among real exports and imports and their percentage to real GDP and their estimated cointegration factor (b) is very close to 1. The empirical findings suggest that the current account of Turkey is sustainable in the long-run.