Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey

This paper analyzes the effects of monetary policy and fiscal adjustment on output and unemployment in Turkey. The model on which the analysis is based accounts for rural-urban migration, a large urban informal sector, flexible exchange rates, a dollarized banking system, and interactions between de...

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Main Authors:	Agénor, Pierre-Richard, Jensen, Henning Tarp, Verghis, Mathew, Yeldan, Erinc
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADJUSTMENT PROGRAM ADVERSE EFFECT ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE SUPPLY AGRICULTURE AVERAGE WAGES BALANCE OF PAYMENTS BANK DEPOSITS BANK LENDING BANK RESTRUCTURING BANKING SECTOR BARGAINING POWER BOND MARKETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET DEFICITS BUSINESS CYCLE CAPITAL NEEDS CENTRAL BANK COLLECTIVE AGREEMENTS COMMERCIAL BANKS CORPORATE INCOME TAX DEBT DEBT SERVICE DEFAULT RISK DISINFLATION DOMESTIC BORROWING DOMESTIC INFLATION DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICES ECONOMIC RESEARCH ELASTICITY ELASTICITY OF SUBSTITUTION EMPLOYEE EMPLOYMENT EMPLOYMENT LEVELS EMPLOYMENT PROBABILITY EMPLOYMENT PROTECTION RULES EQUATIONS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATES EXPECTED WAGE EXPECTED WAGES EXPORTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL SECTOR FIRING COSTS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL MANAGEMENT FISCAL POLICY FISCAL REFORMS FISCAL SUSTAINABILITY FOREIGN BORROWING GDP GNP GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT SUBSIDIES GROWTH RATE INCOME INCOME TAXES INFLATION RATE INFORMAL ECONOMY INFORMAL LABOR MARKET INFORMAL SECTOR INTEREST RATES INTERNATIONAL MIGRATION JOB SEARCH JOB SECURITY JOB TURNOVER LABOR DEMAND LABOR FORCE LABOR FORCE PARTICIPATION LABOR LAWS LABOR MARKET LABOR MARKET ADJUSTMENT LABOR MARKET REGULATIONS LABOR MARKET SEGMENTATION LABOR MARKETS LABOR MIGRATION LABOR REGULATIONS LABOR SUPPLY LIQUIDITY MARGINAL PRODUCT MINIMUM WAGE MINIMUM WAGE LAW MONETARY POLICY NOMINAL INTEREST RATE OPEN UNEMPLOYMENT PAYROLL TAX PAYROLL TAXES PRINCIPLE PRIVATE FIRMS PRIVATE GOODS PRIVATE SECTOR PRIVATE SECTOR WAGE PRIVATE SECTOR WAGES PROBABILITY OF DEFAULT PRODUCTION PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTION SIDE PRODUCTIVE SECTOR PRODUCTIVITY PROFIT MAXIMIZATION PUBLIC PUBLIC CAPITAL PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC GOOD PUBLIC GOODS PUBLIC SECTOR PUBLIC SECTOR BORROWING PUBLIC SECTOR BORROWING REQUIREMENTS PUBLIC SECTOR EMPLOYMENT PUBLIC SECTOR WAGES PUBLIC SERVICES PUBLIC TRANSPORTATION PURCHASING POWER REAL EXCHANGE RATE REAL GROWTH REAL INTEREST RATE REAL INTEREST RATES REAL VARIABLES REAL WAGE REAL WAGES RELATIVE PRICES RETURNS TO SCALE RISK PREMIUM ROADS SAVINGS SERVANTS SEVERANCE PAYMENTS SKILLED WORKER SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STATE-OWNED ENTERPRISES STRUCTURAL ADJUSTMENT SUPPLY CURVE TAX REFORM TAX REVENUE TEMPORARY WORKERS TOTAL EMPLOYMENT TRADE POLICY TRADE UNIONS TREASURY TREASURY BILLS UNEMPLOYED UNEMPLOYMENT UNEMPLOYMENT BENEFIT UNEMPLOYMENT INSURANCE UNEMPLOYMENT RATE UNPAID FAMILY WORKERS UNSKILLED LABOR UNSKILLED WORKERS URBAN ECONOMY URBAN WORKERS VALUE ADDED VAR MODELS WAGE BARGAINING WAGE BILL WAGE RATES WAGE SET WAGES WEALTH WORKER WORKING CAPITAL
Online Access:	http://documents.worldbank.org/curated/en/2006/01/6523042/disinflation-fiscal-sustainability-labor-market-adjustment-turkey http://hdl.handle.net/10986/8829

id	okr-10986-8829
recordtype	oai_dc
spelling	okr-10986-88292021-04-23T14:02:40Z Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey Agénor, Pierre-Richard Jensen, Henning Tarp Verghis, Mathew Yeldan, Erinc ACCOUNTING ADJUSTMENT PROGRAM ADVERSE EFFECT ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE SUPPLY AGRICULTURE AVERAGE WAGES BALANCE OF PAYMENTS BANK DEPOSITS BANK LENDING BANK RESTRUCTURING BANKING SECTOR BARGAINING POWER BOND MARKETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET DEFICITS BUSINESS CYCLE CAPITAL NEEDS CENTRAL BANK COLLECTIVE AGREEMENTS COMMERCIAL BANKS CORPORATE INCOME TAX DEBT DEBT SERVICE DEFAULT RISK DISINFLATION DOMESTIC BORROWING DOMESTIC INFLATION DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICES ECONOMIC RESEARCH ELASTICITY ELASTICITY OF SUBSTITUTION EMPLOYEE EMPLOYMENT EMPLOYMENT LEVELS EMPLOYMENT PROBABILITY EMPLOYMENT PROTECTION RULES EQUATIONS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATES EXPECTED WAGE EXPECTED WAGES EXPORTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL SECTOR FIRING COSTS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL MANAGEMENT FISCAL POLICY FISCAL REFORMS FISCAL SUSTAINABILITY FOREIGN BORROWING GDP GNP GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT SUBSIDIES GROWTH RATE INCOME INCOME TAXES INFLATION RATE INFORMAL ECONOMY INFORMAL LABOR MARKET INFORMAL SECTOR INTEREST RATES INTERNATIONAL MIGRATION JOB SEARCH JOB SECURITY JOB TURNOVER LABOR DEMAND LABOR FORCE LABOR FORCE PARTICIPATION LABOR LAWS LABOR MARKET LABOR MARKET ADJUSTMENT LABOR MARKET REGULATIONS LABOR MARKET SEGMENTATION LABOR MARKETS LABOR MIGRATION LABOR REGULATIONS LABOR SUPPLY LIQUIDITY MARGINAL PRODUCT MINIMUM WAGE MINIMUM WAGE LAW MONETARY POLICY NOMINAL INTEREST RATE OPEN UNEMPLOYMENT PAYROLL TAX PAYROLL TAXES PRINCIPLE PRIVATE FIRMS PRIVATE GOODS PRIVATE SECTOR PRIVATE SECTOR WAGE PRIVATE SECTOR WAGES PROBABILITY OF DEFAULT PRODUCTION PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTION SIDE PRODUCTIVE SECTOR PRODUCTIVITY PROFIT MAXIMIZATION PUBLIC PUBLIC CAPITAL PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC GOOD PUBLIC GOODS PUBLIC SECTOR PUBLIC SECTOR BORROWING PUBLIC SECTOR BORROWING REQUIREMENTS PUBLIC SECTOR EMPLOYMENT PUBLIC SECTOR WAGES PUBLIC SERVICES PUBLIC TRANSPORTATION PURCHASING POWER REAL EXCHANGE RATE REAL GROWTH REAL INTEREST RATE REAL INTEREST RATES REAL VARIABLES REAL WAGE REAL WAGES RELATIVE PRICES RETURNS TO SCALE RISK PREMIUM ROADS SAVINGS SERVANTS SEVERANCE PAYMENTS SKILLED WORKER SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STATE-OWNED ENTERPRISES STRUCTURAL ADJUSTMENT SUPPLY CURVE TAX REFORM TAX REVENUE TEMPORARY WORKERS TOTAL EMPLOYMENT TRADE POLICY TRADE UNIONS TREASURY TREASURY BILLS UNEMPLOYED UNEMPLOYMENT UNEMPLOYMENT BENEFIT UNEMPLOYMENT INSURANCE UNEMPLOYMENT RATE UNPAID FAMILY WORKERS UNSKILLED LABOR UNSKILLED WORKERS URBAN ECONOMY URBAN WORKERS VALUE ADDED VAR MODELS WAGE BARGAINING WAGE BILL WAGE RATES WAGE SET WAGES WEALTH WORKER WORKING CAPITAL This paper analyzes the effects of monetary policy and fiscal adjustment on output and unemployment in Turkey. The model on which the analysis is based accounts for rural-urban migration, a large urban informal sector, flexible exchange rates, a dollarized banking system, and interactions between default risk on government liabilities, credibility, and inflation expectations. The short- and long-run effects of a rise in official interest rates and tax increases are analyzed. The results highlight the importance of accounting for the link between default risk and credibility in understanding the real and financial effects of macroeconomic adjustment. 2012-06-22T19:21:17Z 2012-06-22T19:21:17Z 2006-01 http://documents.worldbank.org/curated/en/2006/01/6523042/disinflation-fiscal-sustainability-labor-market-adjustment-turkey http://hdl.handle.net/10986/8829 English Policy Research Working Paper; No. 3804 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Turkey
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ADJUSTMENT PROGRAM ADVERSE EFFECT ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE SUPPLY AGRICULTURE AVERAGE WAGES BALANCE OF PAYMENTS BANK DEPOSITS BANK LENDING BANK RESTRUCTURING BANKING SECTOR BARGAINING POWER BOND MARKETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET DEFICITS BUSINESS CYCLE CAPITAL NEEDS CENTRAL BANK COLLECTIVE AGREEMENTS COMMERCIAL BANKS CORPORATE INCOME TAX DEBT DEBT SERVICE DEFAULT RISK DISINFLATION DOMESTIC BORROWING DOMESTIC INFLATION DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICES ECONOMIC RESEARCH ELASTICITY ELASTICITY OF SUBSTITUTION EMPLOYEE EMPLOYMENT EMPLOYMENT LEVELS EMPLOYMENT PROBABILITY EMPLOYMENT PROTECTION RULES EQUATIONS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATES EXPECTED WAGE EXPECTED WAGES EXPORTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL SECTOR FIRING COSTS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL MANAGEMENT FISCAL POLICY FISCAL REFORMS FISCAL SUSTAINABILITY FOREIGN BORROWING GDP GNP GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT SUBSIDIES GROWTH RATE INCOME INCOME TAXES INFLATION RATE INFORMAL ECONOMY INFORMAL LABOR MARKET INFORMAL SECTOR INTEREST RATES INTERNATIONAL MIGRATION JOB SEARCH JOB SECURITY JOB TURNOVER LABOR DEMAND LABOR FORCE LABOR FORCE PARTICIPATION LABOR LAWS LABOR MARKET LABOR MARKET ADJUSTMENT LABOR MARKET REGULATIONS LABOR MARKET SEGMENTATION LABOR MARKETS LABOR MIGRATION LABOR REGULATIONS LABOR SUPPLY LIQUIDITY MARGINAL PRODUCT MINIMUM WAGE MINIMUM WAGE LAW MONETARY POLICY NOMINAL INTEREST RATE OPEN UNEMPLOYMENT PAYROLL TAX PAYROLL TAXES PRINCIPLE PRIVATE FIRMS PRIVATE GOODS PRIVATE SECTOR PRIVATE SECTOR WAGE PRIVATE SECTOR WAGES PROBABILITY OF DEFAULT PRODUCTION PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTION SIDE PRODUCTIVE SECTOR PRODUCTIVITY PROFIT MAXIMIZATION PUBLIC PUBLIC CAPITAL PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC GOOD PUBLIC GOODS PUBLIC SECTOR PUBLIC SECTOR BORROWING PUBLIC SECTOR BORROWING REQUIREMENTS PUBLIC SECTOR EMPLOYMENT PUBLIC SECTOR WAGES PUBLIC SERVICES PUBLIC TRANSPORTATION PURCHASING POWER REAL EXCHANGE RATE REAL GROWTH REAL INTEREST RATE REAL INTEREST RATES REAL VARIABLES REAL WAGE REAL WAGES RELATIVE PRICES RETURNS TO SCALE RISK PREMIUM ROADS SAVINGS SERVANTS SEVERANCE PAYMENTS SKILLED WORKER SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STATE-OWNED ENTERPRISES STRUCTURAL ADJUSTMENT SUPPLY CURVE TAX REFORM TAX REVENUE TEMPORARY WORKERS TOTAL EMPLOYMENT TRADE POLICY TRADE UNIONS TREASURY TREASURY BILLS UNEMPLOYED UNEMPLOYMENT UNEMPLOYMENT BENEFIT UNEMPLOYMENT INSURANCE UNEMPLOYMENT RATE UNPAID FAMILY WORKERS UNSKILLED LABOR UNSKILLED WORKERS URBAN ECONOMY URBAN WORKERS VALUE ADDED VAR MODELS WAGE BARGAINING WAGE BILL WAGE RATES WAGE SET WAGES WEALTH WORKER WORKING CAPITAL
spellingShingle	ACCOUNTING ADJUSTMENT PROGRAM ADVERSE EFFECT ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE SUPPLY AGRICULTURE AVERAGE WAGES BALANCE OF PAYMENTS BANK DEPOSITS BANK LENDING BANK RESTRUCTURING BANKING SECTOR BARGAINING POWER BOND MARKETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET DEFICITS BUSINESS CYCLE CAPITAL NEEDS CENTRAL BANK COLLECTIVE AGREEMENTS COMMERCIAL BANKS CORPORATE INCOME TAX DEBT DEBT SERVICE DEFAULT RISK DISINFLATION DOMESTIC BORROWING DOMESTIC INFLATION DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICES ECONOMIC RESEARCH ELASTICITY ELASTICITY OF SUBSTITUTION EMPLOYEE EMPLOYMENT EMPLOYMENT LEVELS EMPLOYMENT PROBABILITY EMPLOYMENT PROTECTION RULES EQUATIONS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATES EXPECTED WAGE EXPECTED WAGES EXPORTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL SECTOR FIRING COSTS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL MANAGEMENT FISCAL POLICY FISCAL REFORMS FISCAL SUSTAINABILITY FOREIGN BORROWING GDP GNP GOVERNMENT BONDS GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT SUBSIDIES GROWTH RATE INCOME INCOME TAXES INFLATION RATE INFORMAL ECONOMY INFORMAL LABOR MARKET INFORMAL SECTOR INTEREST RATES INTERNATIONAL MIGRATION JOB SEARCH JOB SECURITY JOB TURNOVER LABOR DEMAND LABOR FORCE LABOR FORCE PARTICIPATION LABOR LAWS LABOR MARKET LABOR MARKET ADJUSTMENT LABOR MARKET REGULATIONS LABOR MARKET SEGMENTATION LABOR MARKETS LABOR MIGRATION LABOR REGULATIONS LABOR SUPPLY LIQUIDITY MARGINAL PRODUCT MINIMUM WAGE MINIMUM WAGE LAW MONETARY POLICY NOMINAL INTEREST RATE OPEN UNEMPLOYMENT PAYROLL TAX PAYROLL TAXES PRINCIPLE PRIVATE FIRMS PRIVATE GOODS PRIVATE SECTOR PRIVATE SECTOR WAGE PRIVATE SECTOR WAGES PROBABILITY OF DEFAULT PRODUCTION PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTION SIDE PRODUCTIVE SECTOR PRODUCTIVITY PROFIT MAXIMIZATION PUBLIC PUBLIC CAPITAL PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC GOOD PUBLIC GOODS PUBLIC SECTOR PUBLIC SECTOR BORROWING PUBLIC SECTOR BORROWING REQUIREMENTS PUBLIC SECTOR EMPLOYMENT PUBLIC SECTOR WAGES PUBLIC SERVICES PUBLIC TRANSPORTATION PURCHASING POWER REAL EXCHANGE RATE REAL GROWTH REAL INTEREST RATE REAL INTEREST RATES REAL VARIABLES REAL WAGE REAL WAGES RELATIVE PRICES RETURNS TO SCALE RISK PREMIUM ROADS SAVINGS SERVANTS SEVERANCE PAYMENTS SKILLED WORKER SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STATE-OWNED ENTERPRISES STRUCTURAL ADJUSTMENT SUPPLY CURVE TAX REFORM TAX REVENUE TEMPORARY WORKERS TOTAL EMPLOYMENT TRADE POLICY TRADE UNIONS TREASURY TREASURY BILLS UNEMPLOYED UNEMPLOYMENT UNEMPLOYMENT BENEFIT UNEMPLOYMENT INSURANCE UNEMPLOYMENT RATE UNPAID FAMILY WORKERS UNSKILLED LABOR UNSKILLED WORKERS URBAN ECONOMY URBAN WORKERS VALUE ADDED VAR MODELS WAGE BARGAINING WAGE BILL WAGE RATES WAGE SET WAGES WEALTH WORKER WORKING CAPITAL Agénor, Pierre-Richard Jensen, Henning Tarp Verghis, Mathew Yeldan, Erinc Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
geographic_facet	Europe and Central Asia Turkey
relation	Policy Research Working Paper; No. 3804
description	This paper analyzes the effects of monetary policy and fiscal adjustment on output and unemployment in Turkey. The model on which the analysis is based accounts for rural-urban migration, a large urban informal sector, flexible exchange rates, a dollarized banking system, and interactions between default risk on government liabilities, credibility, and inflation expectations. The short- and long-run effects of a rise in official interest rates and tax increases are analyzed. The results highlight the importance of accounting for the link between default risk and credibility in understanding the real and financial effects of macroeconomic adjustment.
format	Publications & Research :: Policy Research Working Paper
author	Agénor, Pierre-Richard Jensen, Henning Tarp Verghis, Mathew Yeldan, Erinc
author_facet	Agénor, Pierre-Richard Jensen, Henning Tarp Verghis, Mathew Yeldan, Erinc
author_sort	Agénor, Pierre-Richard
title	Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
title_short	Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
title_full	Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
title_fullStr	Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
title_full_unstemmed	Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey
title_sort	disinflation, fiscal sustainability, and labor market adjustment in turkey
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/01/6523042/disinflation-fiscal-sustainability-labor-market-adjustment-turkey http://hdl.handle.net/10986/8829
_version_	1764405732339351552

Disinflation, Fiscal Sustainability, and Labor Market Adjustment in Turkey

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