IS CURRENCY SEIGNIORAGE EXOGENOUS FOR INFLATION TAX IN TURKEY

This paper discusses the implications of the validity of the condition ing hypothesis for the maintained money demand equation for an inflati on tax analysis. We also test the validity of the quantity-theoretical inflation tax model for the post-1980 quarterly Turkish data by using Johansen cointegration techniques. The results suggest that the tax r ate (inflation) is weakly exogenous for the parameters of the long-run money demand (tax base) equation. This result, consistent with a Keyn esian endogenous seigniorage-exogenous inflation tax rate theory prior , does not support the hypothesis that the Turkish inflation can be ex plained by the conventional inflation tax revenue-maximizing motive al one.