Question

The country of Turkey, between 1988 and 2003 had inflation of about 60%

per year, peaking at 125% in the mid-1990s. What was its likely cause?

Answer 1

In recent years, Turkish Lira has significantly lost value against USD and this situation has led to an increase in the price of raw materials, which has meant that the price of domestic goods has risen but that wages have not risen equally.

Agricultural production was almost complete because of the policies of the governments. Farmers go to, or go to, major cities. Since they are unable to make profit, and the costs are extremely high for farming especially fuel oil. In this scenario, Turkey has started to import vast quantities of agricultural products from all over the world for the first time  In addition to non-alcoholic drinks, the price of inflation is significant in estimation. Cause the prices of food and non-alcoholic drinks in the consumer price index weigh around 22 per cent.

Over the last two years, the lira has been one of the worst performing emerging market currencies. The Turkish currency sell-off has pushed up prices, eroding confidence in what was once a high-flying emerging market. Growing energy prices have also played a role for Turkey to depend heavily on imported oil, so a jolt higher in dollar-priced crude prices has dealt a serious blow to businesses and consumers alike.

With the economy entering a deep recession, political pressure on the central bank is likely to increase and there is a possibility that the CBRT (Central Bank of the Republic of Turkey) will embark on an easing process much sooner (and more aggressively) than we currently anticipate, leaving the country's long-standing inflation problem unchecked.