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Economic Determinants of Consumer Inflation in Turkey: ARDL Analysis

Author

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  • Sürekçi Yamaçlı, Dilek

    (Nuh Naci Yazgan University)

  • Saatçi, Mustafa

    (Nuh Naci Yazgan University)

Abstract

In this study economic factors that affect consumer prices are examined using the ARDL analysis utilizing monthly data in the period of 2004:01-2015:07 in Turkey. In order to contribute to the literature, CPI, HCPI and ICPI based inflation models are developed, credit card spending is added to the domestic credit volume, weighted average cost of funding is used as an indicator to the interest rate and the effects of the capacity utilization rate and producer prices’ on the inflation are investigated. According to the results of the study, it is found out that lagged values of inflation, capacity utilization rate and producer prices are the main determinants of the consumer price inflation. The impact of the capacity utilization on consumer inflation was found to be higher than the effects of the output gap. The relationship between consumer price inflation and the interest rate in the short and long term are shown to be weak. The increment of inflation in recent years despite the continued increase in interest rates can be explained using this result. In this point of view, effective measures of the reducing of production costs and economic policies restricting the total demand may have a decreasing effect on inflation.

Suggested Citation

  • Sürekçi Yamaçlı, Dilek & Saatçi, Mustafa, 2016. "Economic Determinants of Consumer Inflation in Turkey: ARDL Analysis," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 7(3), pages 53-71, July.
    • Handle: RePEc:ris:buecrj:0235
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    More about this item

    Keywords

    CPI; ICPI; HCPI; ARDL Analysis;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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