Exchange Rate and Import Price Pass-Through in Turkey

Article Information
Journal: Business and Economics Research Journal
Title of Article: Exchange Rate and Import Price Pass-Through in Turkey
Author(s): Bilgin Bari
Volume: 11
Number: 3
Year: 2020
Page: 609-620
ISSN: 2619-9491
DOI Number: 10.20409/berj.2020.272
Abstract
This study researches the effect of exchange rate movements on Turkey’s domestic prices from 2003 through 2019. For the Turkish economy, the structural problems behind the inflation phenomenon are the dependency on imported intermediate goods for production and inflation expectations. Therefore, changes in exchange rates have a significant impact on domestic inflation. To analyze this process, the consumer price index (CPI), producer price index (PPI) and import price index (IPI) are examined by using VAR analysis. Estimations for two distinct periods- stable and upward courses in the exchange rate movement- yield different results. For the first stable period, import price and producer price shocks were more reflective than exchange rate shocks. Exchange rate shocks are found to be stronger than the import price shocks in the second period. The results show that structural problems of the Turkish economy related to production based on the import of intermediate goods, dollarization, and pricing behavior support exchange rate and imported price pass-through to consumer prices.

Keywords: Exchange Rate, Exchange Rate Pass-Through, Imported Prices Pass-Through, Consumer Prices, Vector Auto Regressive Model

JEL Classification: E31, F31, F41

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