COMMON FEATURES AND STYLIZED FACTS IN TURKISH MACROECONOMY

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					 COMMON FEATURES AND STYLIZED FACTS
     IN TURKISH MACROECONOMY


                                Cem Payaslıoğlu
                     Eastern Mediterranean University, Turkey

ABSTRACT

The importance of the common features in macroeconomics particularly in real business cycle
studies is by now widely understood and manifests itself in numerous studies. On the other hand,
there has been very few works related to developing countries. This paper attempts to fill this gap,
at least to some extent, by using quarterly observations on major macroeconomic aggregates,
namely consumption, investment and output in Turkey to investigate both the stylized facts and the
common features. The methodology is based on the multivariate structural time series which allows
explicit representation and estimation of the components of economic time series such as trend,
slope, cycle and irregular. Empirical results indicate that these aggregates do not share a common
cycle; however, a common slope with smooth trend restriction is not rejected indicating that the
series are linked with a cointegration of type
CI (2,2). The findings imply that in spite of the existence of a long-run relation among them,
countercyclical policies targeting any of these variables may not be successfully transmitted to the
others in the short run.

JEL Classifications: C15; C22; C32; E32
Keywords: Unobserved components, common trend, common cycle, common slope
Corresponding Author’s Email Address: cem.payasli@emu.edu.tr


INTRODUCTION

          To conduct good fiscal and monetary policy, a clear understanding of the
working of the economy – and especially of the factors that drive the business cycle – is
necessary. Although the business cycle can be broadly defined as a pervasive oscillatory
movement in economic activity, the term 'cycle' is a misnomer to the extent to which it
suggests a regular periodicity; one of its features is that the length and depth (duration
and amplitude) of the cycle seems to vary. The business cycle studies have always been
at the forefront of the macroeconomic research and the literature is abundant with studies
focusing on the identification of the sources of stimuli which drive cycle-the impulses-
and to determine how they are transmitted-the propagation mechanism. While some
papers mainly dealt with the technical aspects such as methods of dating the peaks and
troughs and/or issues such as the design of the appropriate filter(s) for detrending the
series of interest, substantial number of studies on the other hand, have concentrated on
the association of the business cycles with money, credit and other financial aggregates
(see Mills 2003 for an exhaustive survey).
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          In spite of the diversity of the subjects associated with the topic, it is possible to
narrow down the bu
				
DOCUMENT INFO
Description: The importance of the common features in macroeconomics particularly in real business cycle studies is by now widely understood and manifests itself in numerous studies. On the other hand, there has been very few works related to developing countries. This paper attempts to fill this gap, at least to some extent, by using quarterly observations on major macroeconomic aggregates, namely consumption, investment and output in Turkey to investigate both the stylized facts and the common features. The methodology is based on the multivariate structural time series which allows explicit representation and estimation of the components of economic time series such as trend, slope, cycle and irregular. Empirical results indicate that these aggregates do not share a common cycle; however, a common slope with smooth trend restriction is not rejected indicating that the series are linked with a cointegration of type CI (2,2). The findings imply that in spite of the existence of a long-run relation among them, countercyclical policies targeting any of these variables may not be successfully transmitted to the others in the short run. [PUBLICATION ABSTRACT]
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