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Exchange Rate Pass-Through to Consumer Prices in Turkey: Nonparametric Kernel Estimation Evidence

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  • Yilmaz, Nejat
  • Yucel, Eray

Abstract

Exchange rate pass-through (ERPT) in the Turkish economy appeared again, especially after mid-2018 when policies to re-balance and soft-land the economy failed to a wide extent. Such re-appearance of the feedback from exchange rates to domestic prices deserves investigative efforts, having recalled that part of the stabilization success of the Central Bank of Turkey in early 2000s directly stemmed from its ability to reduce ERPT. In this paper, we aim to contribute to current policy discussions on Turkey by presenting our nonparametric kernel-based density function and regression estimates of the pass-through effect. Our findings are indicative not only of a sizable level of ERPT but also of its dependence on the size of currency depreciation.

Suggested Citation

  • Yilmaz, Nejat & Yucel, Eray, 2021. "Exchange Rate Pass-Through to Consumer Prices in Turkey: Nonparametric Kernel Estimation Evidence," MPRA Paper 105895, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105895
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    References listed on IDEAS

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    5. Francesca G. Caselli & Agustin Roitman, 2019. "Nonlinear exchange‐rate pass‐through in emerging markets," International Finance, Wiley Blackwell, vol. 22(3), pages 279-306, December.
    6. Caglar Yunculer, 2011. "Pass-Through of External Factors into Price Indicators In Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 11(2), pages 71-84.
    7. Onel, Gulcan & Goodwin, Barry K., 2013. "A Non-parametric Approach to Modeling Exchange Rate Pass-through in Basic Commodity Markets," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150319, Agricultural and Applied Economics Association.
    8. Hakan Kara & Hande Kucuk Tuger & Umit Ozlale & Burc Tuger & Devrim Yavuz & Eray M. Yucel, 2005. "Exchange Rate Pass-Through in Turkey : Has it Changed and to What Extent?," Working Papers 0504, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    9. Hakan Kara & Hande Küçük‐Tuğer & Ümit Özlale & Burç Tuğer & Eray M. Yücel, 2007. "Exchange Rate Regimes And Pass‐Through: Evidence From The Turkish Economy," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 206-225, April.
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    Cited by:

    1. Barış Soybilgen & M. Ege Yazgan & Hüseyin Kaya, 2023. "Nowcasting Turkish Food Inflation Using Daily Online Prices," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 19(2), pages 171-190, September.

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    More about this item

    Keywords

    Exchange Rate; Currency Depreciation; Pass-through to Inflation; Consumer Prices; Monetary Policy; Inflation Targeting; Central Bank Performance;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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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