Inflation Expectations in Turkey: Statistical Evidence from the Business Tendency Survey

Abstract

In Turkey, the importance placed on public's expectations about future economic and financial conditions has risen in recent years within the upcoming fully-fledged policy of inflation targeting framework; in accordance, information on expectations of future inflation could be inferred from surveys of expectations. This paper examines the inflation expectations of firms in the manufacturing sector in Turkey, assessing the Central Bank of the Republic of Turkey's Business Tendency Survey data. The focus of this paper is a wide-ranging analysis of the characteristics of the inflation expectations of firms rather than their formation. The paper not only evaluates the performance of inflation expectations (whether they are in line with realizations and how they react to the shifts in the economy) but also handles the characteristics of their distribution. Besides, the paper attempts to see how expectations vary across sub-sectors and to analyze their relationship with other expectations.