The Effect of Energy Inflation on Agricultural Products Inflation: The Case of Türkiye

The high inflation problem that Turkey has been struggling with in recent years necessitates studies investigating the prices of agricultural products, one of the determinants of inflation. The aim of this study is to analyze the long-term effect of energy inflation, which affects agricultural product prices through production costs, on agricultural products’ inflation with a Fourier approach. In this direction, using Turkey's monthly data between 2016:02-2023:04, the long-term effect of energy inflation on agricultural products’ inflation was examined with Fourier SHIN cointegration analysis and the result that the series were cointegrated was obtained. The long-term coefficients of the model were estimated using the Fully Modified Least Squares (FMOLS) method, and it was seen that energy inflation has a positive effect on agricultural products’ inflation in the long run. Finally, Toda-Yamamoto (TY) and Fourier Toda-Yamamoto (Fourier TY) methods were applied to determine the causality relationship between the variables and the bidirectional causality relationship was determined between energy inflation and agricultural product inflation. The findings show that policymakers should take energy prices into account when evaluating the prices of agricultural products. In addition, it is suggested that an economy like Turkey, which is foreign-dependent in energy and facing the problem of high inflation, should turn to alternative energy sources and increase its investments in this field.