Abstract
This study analyses the Turkish inflation dynamics (2000:01-2013:04) within the New Keynesian Phillips Curve (NKPC) framework. Inflation equations are estimated by GMM methodology against unemployment (and employment) explanatory variables. Estimation results reveal inflation is responsive to the detrended level of unemployment of first and second lag. Although we detect presence of unemployment PC, coefficients of the function are not prominent. Positively sloped PC is also detected for employment of first lag. Further there is also rate of change PC with unemployment revealing hysteresis behavior, whereas the pattern is hardly observed for employment during the low and stable inflation period of post 2004.
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