**4. Findings and remarks**

As unexpected inflation increases with rising inflation uncertainty, the more inflation uncertainty increases inflation for the pre-2003 and post-2003. It is noteworthy that increases in the period after 2003 are less than the previous period. In the period before 2003, the more inflation uncertainty is an increasing effect on economic growth. In this period, as consumption expenditures were made for saving, the increase in inflation uncertainty has led to a shift in commodity markets. Since consumption expenditures are not made for saving, more inflation uncertainty makes the reducing effect on economic growth in the post-2003 period.

Inflation uncertainty increases domestic prices, and so nominal exchange rate is also increased for both of the periods. While an exchange rate regime system was based on the "devaluation as much as inflation" idea in the period before 2003 (excluding the period between December 1999 and February 2001), flexible exchange rate system was implemented under implicit and explicit inflation-targeting regime in the post-2003 period. Due to the fact that the adequate adjustment is provided in nominal exchange rate, inflation uncertainty has no effect on the reel exchange rates for the pre-2003 and post-2003 periods.

The increase in inflation uncertainty reduces the nominal interest rate in the period before 2003. Although the reduction of the nominal interest rate as inflation uncertainty increases, or the negative impact of inflation uncertainty on the nominal interest rate, seems contradictory at first glance, this result describes the features of the period before 2003. A severe increase in government borrowing needs is the basic phenomena that determine market interest rate for the pre-2003 period. In case that the state borrowing to repay the debt is a key factor in determining the market interest rates. The banks become main actors in financing the government. Given that deposits be a source of funding for banks, the decreasing effect of more inflation uncertainty on deposit interest rates is a reflection of the behavior of the banks' increasing profit margin, because bank is shrouded in a structure that they collect the deposits to the state as a debt in the period before 2003.

The increase in nominal interest rate as an impact of more inflation uncertainty is an expected result in the period after 2003. The most capital inflow to Turkey was experienced in the post-2003 period. It is a period in which it becomes very important that interior interest rates are too sensitive to outside interest rates and foreign interest rate is extremely high in the determination of domestic interest rates in Turkey. The supply of funds in the financial markets is largely shaped by a capital flow to Turkey. Capital flows to Turkey largely consist of hot money flows. In this sense, nominal interest rates are increasing due to the reduction in hot money flows as inflation uncertainty increases.

In addition, the inflation uncertainty and nominal interest rate relationship obtained from the study findings support the findings of inflation uncertainty and growth relationship. Consumption spending has become sensitive to interest rates due to the increase in financing consumption spending with credits (the most common example of a credit card) in the post-2003 period. If our findings are being analyzed, in the period after 2003, inflation uncertainty has an impact on nominal interest rate increase.

The fiscal policies implemented before the 2003 period and the conjunctural situation of the country caused the inflation rates to be considerably higher than the developed countries especially. Inflation uncertainty has led to the realization of the Tanzi effect, known as inflation cause to erode the real value of the tax revenues, in the pre-2003 period. In the same period, there was no inverse Tanzi effect, which means a decrease in the real value of public expenditures due to high inflation. When the post-2003 period was passed, the opposite effect was observed.
