08/05/2008

Bünyamin Güler & Yigit Ergül ( BUS 07 )

• Background of inflation.
• What is inflation ?
• How does inflation exist ?
• Costs of inflation.
• Inflation in Turkey.
• Calculation of inflation.
• The situation of Inflation in Turkey.
• Discussion.
• Resources.
 • Relation between inflation and economical growth has
been a discussion topic for a long years.People had a
several comments and ideas on this relation.
• According to experts,Until 1980s inflation was a
positive improvement which was related with
economical growth.
• However,at the last 20 years economic experts said
that according to their researchs, inflation effects
economical growth in a negative way.
• But still experts havent got an agreement on this topic.

Source: http://www.nuveforum.net/41-ekonomi-taslaklari/39257-enflasyon-nedir-nasil-hesaplanir-nasil-yorumlanir/
 What is Inflation ?

 Theorical:The rate at which the general

level of prices for goods and services is
rising, and, subsequently, purchasing
power is falling.
 Practical:“inflation means that your money
won’t buy as much today as you could
yesterday. ”

Source: http://www.ntvmsnbc.com/news/222962.asp
 How does inflation exist ?

 The government prints too much money

(money supply)
 Increases in government taxes and fees can
lead to inflation.(especially when businesses
are taxed)
 When the cost of business goes up, product
prices go up.(When prices go up your income
effectively goes down.)
 Which then makes the business costs go up
and so prices go up and so on…

Source:http://www.nuveforum.net/41-ekonomi-taslaklari/39257-enflasyon-nedir-nasil-hesaplanir-nasil-yorumlanir/
 Costs of inflation.

 Shoeleather costs
 Menu costs
 Tax liabilities
 Uncertainty
 Arbitrary redistribution of wealth
 Competitiveness (if our prices are increasing
faster than prices in other countries, then our
goods will be less competitive and less in
demand. This will have a negative effect on the
balance of payments.)
Source:Victoria Büsch
Inflation in Turkey.

 Turkey experienced a short period of

high inflation in the second half of the
1950s but the history of today’s high and
persistent inflation goes back to the first
half of the 1970s at the earliest.
This high and persistent inflation
rates since the early 1970s has
been fed by ;
 High public sector budget deficits,
 High military expenditures associated with geopolitical
reasons,
 Occasional increases in world prices of major imported
inputs (particularly, crude-oil)
 Increases in regulated prices of public sector products
which are mainly used as input by the domestic private
sector
 Massive infrastructure investments of the various
governments.
Annual Inflation Rate in Turkey
Annual Percentage Change
Annual Percentage Change
Annual Percentage Change
 The Prices Before 2005

 A bottle of drinking water: 300,000 TL

 Movie ticket: 7,500,000 TL
 Toyota Corolla: 32,900,000,000 TL (32 billion)
 Turkish GDP in 2002: 273,463,167,795,000,000 TL
(273 quadrillion)
 The highest-denominated banknote (20,000,000)
was used only in Turkey

Source:http://www.econ.umn.edu/~steve/2006_1102h/ytl.pdf
Redenomination of the
Turkish Lira
 Remove 6 zeros

 The new currency: Yeni Türk Lirası

(YTL) (The New Turkish Lira)

 Conversion Rate: TL 1,000,000 = YTL 1

Discussion

 Do you think redenomination has

effect on inflation rate?
Resources
 http://en.wikipedia.org/wiki/Economic_history_of_Tur
 http://w
ww.internationalmonetaryfund.org/external/pubs/cat/
 http://eupolitics.einnews.com/news/eu-turkey-inflatio
 http://www.tcmb.gov.tr/yeni/announce/2008/Go
vYilmaz_InflationReport1Pres08.pdf
Bünyamin Güler
Yigit Ergül