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Pass-Through of External Factors into Price Indicators In Turkey

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  • Caglar Yunculer

Abstract

This study analyzes the pass-through of exchange rate and US Dollar denominated import prices into consumer and producer prices in Turkey. To this end, pricing along a distribution chain framework is utilized and it is estimated by Vector Auto Regression (VAR) for the pre-inflation targeting and the inflation targeting periods. Results show that the pass-through of both external factors into producer prices is higher than it is for consumer prices. In addition, the degree of pass-through is significantly lower in the inflation targeting period compared to the previous period. The cumulative exchange rate and import price pass-through coefficients into consumer prices for the recent period are found similar to each other while import price shocks are reflected much faster. For the producer prices, import price shocks are found to be reflected more than the exchange rate shocks. An exercise based on these estimation results shows that during 2007-2009 external factors were influential on consumer prices. Furthermore simultaneous counter movements of exchange rate and import prices at that period limited and sometimes offset the impact of each other on consumer prices.

Suggested Citation

  • 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.
  • Handle: RePEc:tcb:cebare:v:11:y:2011:i:2:p:71-84
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Oguz Atuk & Cem Aysoy & Mustafa Utku Ozmen & Cagri Sarikaya, 2014. "Turkiye’de Enflasyonun Is Cevrimlerine Duyarliligi : Cikti Acigina Duyarli TUFE Alt Gruplarinin Saptanmasi," Working Papers 1437, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Vasif Abiyev & Munise Ilıkkan Özgür, 2014. "Fear of Floating and Inflation Targeting in Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(3), pages 25-42, December.
    3. Tunc, Cengiz & Kılınç, Mustafa, 2016. "Exchange Rate Pass-Through in a Small Open Economy: A Structural VAR Approach," MPRA Paper 72770, University Library of Munich, Germany, revised 28 Jul 2016.
    4. Evren Erdogan Cosar & Sevim Kosem & Cagri Sarikaya, 2013. "Do We Really Need Filters In Estimating Output Gap? : Evidence From Turkey," Working Papers 1333, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. Selen Baser & Hande Kucuk & Fethi Ogunc, 2013. "Inflation Dynamics in Turkey : In Pursuit of a Domestic Cost Measure," CBT Research Notes in Economics 1311, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Dincer Dedeoglu & Huseyin Kaya, 2015. "Model Belirsizligi Altinda Doviz Kurunun Enflasyona Etkisi," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 15(2), pages 79-93.
    7. Hatice Burcu Gurcihan Yunculer & Fethi Ogunc, 2015. "Firma Maliyet Yapisi ve Maliyet Kaynakli Enflasyon Baskilari," Working Papers 1503, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    8. Suleyman Hilmi Kal & Ferhat Arslaner & Nuran Arslaner, 2015. "Sources of Asymmetry and Non-linearity in Pass-Through of Exchange Rate and Import Price to Consumer Price Inflation for the Turkish Economy during Inflation Targeting Regime," Working Papers 1530, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    9. Oguz Atuk & Fethi Ogunc & M. Utku Ozmen & Cagri Sarikaya, 2013. "Turkiye’de Uretici ve Tuketici Fiyatlari Arasindaki Iliski Uzerine Bir Degerlendirme," CBT Research Notes in Economics 1321, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

    More about this item

    Keywords

    Inflation; Pass-through; Exchange rate; Import prices; VAR analysis;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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