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Dissecting Turkish inflation: theory, fact, and illusion

Author

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  • Zeynep Kantur

    (Başkent University)

  • Gülserim Özcan

    (Atılım University)

Abstract

The policy debate in Turkey over the impact of interest rate on inflation concerns the question of what policymakers should do when faced with volatile and high inflation. Motivated by this discussion, we provide an empirical analysis by connecting the cost channel to the Phillips relation. Our findings prove the existence of the cost channel. However, other determinants of inflation —labor share of income, prices of imported inputs, and consumption goods —dominate the cost channel in Turkey.

Suggested Citation

  • Zeynep Kantur & Gülserim Özcan, 2022. "Dissecting Turkish inflation: theory, fact, and illusion," Economic Change and Restructuring, Springer, vol. 55(3), pages 1543-1553, August.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09357-1
    DOI: 10.1007/s10644-021-09357-1
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    Cited by:

    1. Mehmet Ulug & Sayım Işık & Mehmet Mert, 2023. "The effectiveness of ultra-loose monetary policy in a high inflation economy: a time-varying causality analysis for Turkey," Economic Change and Restructuring, Springer, vol. 56(4), pages 2855-2887, August.
    2. İbrahim Özmen & Şerife Özşahin, 2023. "Effects of global energy and price fluctuations on Turkey's inflation: new evidence," Economic Change and Restructuring, Springer, vol. 56(4), pages 2695-2728, August.

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    More about this item

    Keywords

    Inflation dynamics; Cost channel; Monetary transmission; Open economy New Keynesian Phillips curve; Generalized method of moments;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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