IDEAS home Printed from
   My bibliography  Save this paper

How Do Indirect Taxes on Tobacco Products Affect Inflation?


  • Cem Cakmakli

    (Department of Economics, Koç University)

  • Selva Demiralp

    () (Department of Economics, Koç University)

  • Sevcan Yesiltas

    (Department of Economics, Koç University)

  • Muhammed A. Yildirim

    (Department of Economics, Koç University)


This study examines the effects of price adjustments in the tobacco sector on inflation in Turkey. The findings show that the taxes on tobacco products increase inflation in the short-term. However, the effect is rather limited, a 16 basis points increase in inflation if the current 65.25% Special Consumption Tax (SCT) increases by 25 basis points. Factors that cause inflation in the long-run are cost and demand. The cost-driven impact of tobacco prices on inflation is rather limited due to the low weight of this product in the consumption basket. Nevertheless, the structure of the tax multiplier used in tobacco taxation increases cigarette prices in a non-linear fashion and, therefore, has the potential to disrupt inflationary expectations.

Suggested Citation

  • Cem Cakmakli & Selva Demiralp & Sevcan Yesiltas & Muhammed A. Yildirim, 2018. "How Do Indirect Taxes on Tobacco Products Affect Inflation?," Koç University-TUSIAD Economic Research Forum Working Papers 1811, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1811

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Oguz Atuk & Cem Cebi & M. Utku Ozmen, 2011. "Tutun Urunlerinde Ozel Tuketim Vergisi Uygulamasi," CBT Research Notes in Economics 1116, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Oguz Atuk & Mustafa Utku Ozmen, 2015. "Firm Strategy, Consumer Behavior and Taxation in Turkish Tobacco Market," Working Papers 1518, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    4. Seth Carpenter & Selva Demiralp, 2008. "The Liquidity Effect in the Federal Funds Market: Evidence at the Monthly Frequency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(1), pages 1-24, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:koc:wpaper:1811. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sumru Oz). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.