‘Hyperinflation’ Statement by Steve Hanke for Turkey

There was a name we talked a lot in the past months. This name, through its own parameters He said he was calculating the “real” inflation in Turkey. Steve Hanke, a professor at Johns Hopkins University. According to the statements made by Hanke, there was a huge difference between inflation in Turkey and the data announced by TURKSTAT. So much so that the November 2021 inflation, which is 21.31 percent, of Turkstat, according to the professor 100.65 percentit was

Answering the questions of Elif Karaca from the World, Prof. Hanke made remarkable statements about Turkey. “Will there be hyperinflation in Turkey?” and “What should Turkey do to reduce inflation?The professor of economics, who answered very important questions such as ” it’s not too late for anything gave the signals. Let’s all take a closer look at the statements made by Steve Hanke.

What is hyperinflation?

In the image above, you can see what the term hyperinflation means on a sample image. When you read the description, you will understand the logic in this photo much better.

The first of the questions posed to Steve Hanke was, predictably, “What is hyperinflation?The economics professor explains the phrase we’ve been discussing for a while: According to the view adopted in the academic literature, If the monthly inflation rate exceeds 50% hyperinflation classification. This definition was adopted in 1956 after the publication of Phillip Cagan’s analysis of hyperinflation in the book Studies in the Quantity Theory of Money, edited by Milton Friedman. I developed Cagan’s 50% monthly hyperinflation threshold as I use high-frequency data and PPP theory to measure inflation every day in countries with significant price increases. Residual hyperinflation with advanced measurement techniques, I define it as an inflation exceeding 50% per month for at least 30 consecutive days.

Statements made by Steve Hanke, monthly inflation in a month being over 50 percent every day He says it means hyperinflation. The Glossary of the Central Bank of the Republic of Turkey uses this term as the annual inflation rate. if it exceeds 200% indicates hyperinflation. According to the CBRT, if you pay at least 300 TL for a product you bought for 100 TL on January 1, 2021, hyperinflation has occurred. Steve Hanke, on the other hand, for a product you bought for 100 TL in December 2021, for January 2022. for at least 150 TL He says that if you take it, there will be hyperinflation.

Is there a possibility of hyperinflation in Turkey?

Another question posed to Steve Hanke was “Is there a possibility of hyperinflation in Turkey?“. About this optimistic Hanke stated that according to statistics, the probability of hyperinflation in Turkey is very low. The explanations of the professor of economics on this subject are as follows: Hyperinflation is a rare condition. There have been only 62 cases of hyperinflation in world history. of hyperinflation in Turkey. I wouldn’t say it’s impossible, but statistically the probability is pretty low. I can tell. There is an endemic “high” inflation problem in Turkey.

How should Turkey fight inflation?

Perhaps the most important of the questions Elif Karaca asked Steve Hanke is, how to avoid inflation. “The only way to ensure Turkey has relatively low inflation and low interest rates is to do exactly what has been done in Bulgaria. Law on the Bulgarian National Bank, replaced by currency board law and has made significant contributions to this country for the last 25 years. Incidentally, this has been the case with over 70 currency boards that have ever existed. As a reminder, the most famous currency board is in Hong Kong. In all circumstances, including the 1997-98 Asian Financial Crisis and the more recent political turmoil in Hong Kong. perfectly executed.“This is how Hanke explained what needs to be done. So what is this money board?

What is the Currency Board?

The name that explains the term “Money Board” is an economy journalist. Faruk Turkoglu. Türkoğlu explains this exchange regime as follows: In such an application, the value of the national currency is denominated in a foreign currency or fixed against a basket. From the point of view of monetary policy implementation, the board system allows the monetary base to change only by transactions made against foreign currency. In other words, when foreign currency is sold to the central bank at a predetermined fixed rate, the amount of money increases, decreases when foreign currency is received from the central bank.