What is Inflation Targeting

The relationship among inflation, unemployment, and economic growth can be treated as a trade-off in general. When the economy is in recession, inflationary pressures are expected to decrease while unemployment is increasing. On the contrary, a decrease is expected while inflationary pressures are rising. Thus the relation between these twin macroeconomic variables and their relation to economic growth are a focal point for developing countries. The aim of this study is analyzing the relationship among unemployment, inflation, and economic growth in Turkey by alternative methods. Thus the causality among these variables is tested with modified Wald statistic developed by Toda-Yamamoto. Findings obtained from causality test will provide policy recommendations for Turkish economy on a macroeconomic level.