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Does Exchange Rate Pass-Through Change Over Time in Turkiye?

Author

Listed:
  • Mustafa Cakir

    (Samsun University, Department of Maritime Management, Samsun, Turkiye)

  • Ahmet Ekrem Kaya

    (Istanbul Sabahattin Zaim University, Department of Economics, Istanbul, Turkiye)

Abstract

This paper investigates whether the effects of exchange rate pass-through on general and disaggregated consumer prices change over time in Turkiye. Using the time-varying Granger causality (TVGC) test, the study examines the causality relationship between the US dollar and the consumer price index (CPI) over the 1986M01-2022M06 period and then the causality relationship between a US dollar and Euro currency basket and 12 main expenditure groups over the 2003M01- 2022M06 period. According to the findings, the effects of exchange rate pass-through (ERPT) on the CPI and major groups of consumer expenditures decreased based on the floating exchange rate and explicit inflation-targeting regime in Turkiye. The findings obtained from the TVGC test showed This paper investigates whether the effects of exchange rate pass-through on general and disaggregated consumer prices change over time in Turkiye. Using the time-varying Granger causality (TVGC) test, the study examines the causality relationship between the US dollar and the consumer price index (CPI) over the 1986M01-2022M06 period and then the causality relationship between a US dollar and Euro currency basket and 12 main expenditure groups over the 2003M01- 2022M06 period. According to the findings, the effects of exchange rate pass-through (ERPT) on the CPI and major groups of consumer expenditures decreased based on the floating exchange rate and explicit inflation-targeting regime in Turkiye. The findings obtained from the TVGC test showed.

Suggested Citation

  • Mustafa Cakir & Ahmet Ekrem Kaya, 2023. "Does Exchange Rate Pass-Through Change Over Time in Turkiye?," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(73-1), pages 359-383, June.
    • Handle: RePEc:ist:journl:v:73:y:2023:i:1:p:359-383
    DOI: 10.26650/ISTJECON2022-1210198
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate pass-through; Consumer prices; Time-varying Granger causality JEL Classification: C22 ; E31 ; F31;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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