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How do real and monetary integrations affect inflation dynamics?

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  • Saygılı, Hülya

Abstract

This paper examines the significance of real and monetary integrations for the inflationary dynamics of an emerging country, Turkey. The analysis accounts for 2-digit items of CPI inflation, which can be broadly categorized as tradable versus non-tradable and goods versus services. We find that a fall in the inflation gap between partner countries is mainly related to real integration whereas the co-movement of inflation is prominently driven by monetary policy co-movements. The product-type analysis shows that inflation gap in tradable items between trade partners shrinks and becomes more correlated with the (de)convergence and co-movement of real integration.

Suggested Citation

  • Saygılı, Hülya, 2023. "How do real and monetary integrations affect inflation dynamics?," International Economics, Elsevier, vol. 174(C), pages 18-27.
    • Handle: RePEc:eee:inteco:v:174:y:2023:i:c:p:18-27
    DOI: 10.1016/j.inteco.2023.02.001
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    More about this item

    Keywords

    Globalization; Inflation gap; Convergence; Co-movement; CPI sub-Items; Turkey;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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