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The impacts of oil price shocks in Turkey: sectoral evidence from the FAVAR approach

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  • Uğur Akkoç

    (Pamukkale University)

  • Anıl Akçağlayan

    (Ankara University)

  • Gamze Kargın Akkoç

    (Ankara Yıldırım Beyazıt University)

Abstract

This paper investigates the effects of crude oil price shocks on the Turkish economy from 2005:01 to 2018:04 using a relatively new technique: the factor-augmented vector autoregressive (FAVAR) approach. The findings indicate the importance of crude oil prices to inflation, sectoral growth, and monetary policy. The main results of the impulse response analyses are as follows: (1) Oil price shocks did not explain changes in industrial production growth or its subsectors; (2) the responses of different price indices to positive oil price shocks are statistically significant and persistent. The largest number of price increases occurs in the transportation and food and beverage sectors; (3) monetary policy does not respond to oil price shocks. One can claim that the interest rate does not respond to oil price and allow the prices to adjust. Afterward, the price adjustment neutralizes the production effects of the oil price shocks.

Suggested Citation

  • Uğur Akkoç & Anıl Akçağlayan & Gamze Kargın Akkoç, 2021. "The impacts of oil price shocks in Turkey: sectoral evidence from the FAVAR approach," Economic Change and Restructuring, Springer, vol. 54(4), pages 1147-1171, November.
    • Handle: RePEc:kap:ecopln:v:54:y:2021:i:4:d:10.1007_s10644-020-09295-4
    DOI: 10.1007/s10644-020-09295-4
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    Cited by:

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    More about this item

    Keywords

    FAVAR; Turkey; Oil price; Inflation; Food price;
    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
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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