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Tradable and non-tradable inflation in Turkey: asymmetric responses to global factors

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  • Hülya Saygılı

    (Atılım University)

  • Aysun Türkvatan

    (Central Bank of the Republic of Turkey)

Abstract

We contribute to the debate on the linkage between inflation regimes and globalization in several respects. First, we analyze consumer goods and services classified with respect to their tradability and content of intermediate imports. Second, we use 4-digit commodity-based price index data and the official weights of items in the consumer basket in computations. Third, we explore which states of the reference indicators are more related to low, normal or high regimes of inflation. Regimes are determined using Markov regime-switching models. Probability score analysis compares the best matching of different regimes of inflation and reference indicators. Fourth, since we use commodity-based data we perform the analysis for an emerging country, Turkey, which has not only high trade openness and high global integration rate but also implements inflation targeting regime. Findings suggest that relevance of the reference indicators for predicting inflation depends on: the share of tradable items in the consumer basket, imported intermediate content of items in the consumer basket, the regime of inflation and invoicing currency.

Suggested Citation

  • Hülya Saygılı & Aysun Türkvatan, 2023. "Tradable and non-tradable inflation in Turkey: asymmetric responses to global factors," Empirical Economics, Springer, vol. 65(2), pages 973-1006, August.
  • Handle: RePEc:spr:empeco:v:65:y:2023:i:2:d:10.1007_s00181-023-02364-3
    DOI: 10.1007/s00181-023-02364-3
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    More about this item

    Keywords

    Inflation regimes; Tradable/non-tradable inflation; Markov regime-switching models; Probability score analysis;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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