Oil price and exchange rate pass-through to inflation in Turkey: An analysis through the time-varying parameter models

Abstract

In this study, the pass-through effect of oil prices and exchange rate on producer and consumer prices in Turkey was examined by emphasizing the pass-through effect of exchange rate. To this end, the pass-through parameters were estimated using monthly data between January 1985 and December 2018 with the vector autoregressive (TVP-VAR) method with time varying parameters. The findings showed that the pass-through of oil prices and exchange rates to producer and consumer prices was not linear but changed over time. Although the pass-through effect in Turkey has decreased compared to previous years, it has shown a tendency to increase again in the recent period under macro prudential policies. This result indicated that inflation dynamics in Turkey are highly sensitive to external factors and inflation persists as a structural problem. In addition, the pass-through effect on producer prices from both oil prices and exchange rates was higher than the pass-through effect on consumer prices.

Keywords

• Pass-Through
• Oil price
• Exchange Rate
• Inflation
• TVP-VAR method

Türkiye’de petrol fiyatlarından ve döviz kurundan enflasyona geçişkenlik: Zamana göre değişen parametreli bir analiz

Abstract

Bu çalışmada Türkiye’de petrol fiyatları ve döviz kurunun üretici ve tüketici fiyatlarına geçişkenlik etkisi, döviz kurunun geçişkenlik etkisine vurgu yapılarak incelenmiştir. Bu amaçla zamana göre değişen parametreli vektör otoregresif (TVP-VAR) yöntemi ile Ocak 1985 – Aralık 2018 dönemleri arasında aylık veriler kullanılarak geçişkenlik parametreleri tahmin edilmiştir. Elde edilen bulgular petrol fiyatları ve döviz kurunun üretici ve tüketici fiyatlarına geçişkenliğinin doğrusal olmayıp zamana göre değiştiğini göstermektedir. Türkiye’de geçişkenlik etkisi geçmiş yıllara kıyasla azalmakla birlikte makro ihtiyati politikalar altında son dönemde tekrar artma eğilimi göstermektedir. Bu sonuç Türkiye’de enflasyon dinamiklerinin dışsal faktörlere oldukça duyarlı olduğunu ve enflasyonun yapısal bir sorun olarak hala sürdüğüne işaret etmektedir. Ayrıca hem petrol fiyatlarından hem de döviz kurundan üretici fiyatlarına geçişkenlik etkisi tüketici fiyatlarına geçişkenlik etkisinden daha yüksektir.

Keywords

• Geçişkenlik
• Petrol fiyatları
• Döviz kuru
• Enflasyon
• TVP-VAR yöntemi

References

1. Akçelik, F. ve Öğünç, F. (2016). Pass-Through of crude oil prices at different stages in Turkey. Central Bank Review, 16 (1), 41-51.
2. Akdeniz, C. ve Çatık, N. (2019). Parasal aktarım mekanizmalarının işleyişinde finansal koşulların önemi: TVP-VAR modellerinden bulgular. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, (34), 73-96.
3. Arbatlı, E., (2003). Exchange rate pass-through in Turkey: Looking for asymmetries. Central Bank Review, 3 (2), 85-124.
4. Arratibel, O. ve Michaelis, H. (2014). The impact of monetary policy and exchange rate shocks in Poland: Evidence from a time-varying VAR. European Central Bank Working Paper, (No.1636), 1-38.
5. Atuk, O., Aysoy, C., Özmen, M. U., Sarıkaya, C. (2014). Türkiye’de enflasyonun iş çevrimlerine duyarlılığı: çıktı açığına duyarlı tüfe alt gruplarının saptanması. Türkiye Cumhuriyet Merkez Bankası Çalışma Tebliği (No. 14-37), 1-27.
6. Benlialper, A., Cömert, H., Öcal, N. (2017). Asymmetric exchange rate policy in inflation targeting developing countries. Working Paper, Institute for International Political Economy Berlin, (No. 86-2017), 1-30.
7. Buddhari, A. ve Chensavasdijai, V. (2003). Inflation dynamics and its implications for monetary policy. BOT Symposium, 1-43.
8. Calderón, C. ve Schmidt-Hebbel, K. (2008). What drives inflation in the world? Central Bank of Chile Working Papers, 491: 1-46.

9. Campillo, M. ve Miron, J. A. (1997). Why does inflation differ across countries? The National Bureau of Economic Research, 9: 335-362.
10. Carrion-i-Silvestre, J. L. ve Sansó, A. (2007). The KPSS test with two structural breaks. Spanish Economic Review, 9 (2), 105-127.
11. Çatik, A. N. ve Karaçuka, M. (2012). Oil Pass-through to domestic prices in Turkey: Does the change in inflation regime matter? Economic research-Ekonomska istraživanja, 25(2), 277-296.
12. Çatık, A. N., Karaçuka, M., Gök, B. (2016). A time-varying parameter VAR investigation of the exchange rate pass-through in Turkey. Panoeconomicus, 63 (5), 563-579.
13. Choi, S., Furceri, D., Loungani, P., Mishra, S., Poplawski-Ribeiro, M. (2018). Oil prices and inflation dynamics: Evidence from advanced and developing economies. Journal of International Money and Finance, 82, 71-96.
14. Civcir, I. ve Akçağlayan, A. (2010). Inflation targeting and the exchange rate: Does it matter in Turkey? Journal of Policy Modeling, 32 (3), 339-354.
15. Coricelli, F., Jazbec, B., Masten, I. (2006). Exchange rate pass-through in EMU acceding countries: Empirical analysis and policy implications. Journal of Banking and Finance, 30: 1375-139
16. Darvas, Z. (2001). Exchange rate pass-through and real exchange rate in EU candidate countries. Economic Research Centre of the Deutsche Bundesbank Discussion Paper, 10/01: 1-68.
17. De Gregorio, J., Landerretche, O., Neilson, C., Broda, C., Rigobon, R. (2007). Another pass-through bites the dust? Oil prices and inflation [with comments]. Economia, 7(2), 155-208.
18. Dedeoğlu, D. ve Kaya, H. (2014). Pass-Through of oil prices to domestic prices: Evidence from an oil-hungry but oil-poor emerging market. Economic Modelling, (43), 67-74.
19. Dedeoğlu, D., ve Kaya, H. (2015). Model belirsizliği altında döviz kurunun enflasyona etkisi. Central Bank Review, 15(2), 79.
20. Devereux, M. B. (1989). Non-traded goods and international transmission of fiscal policy, Canadian Journal of Economics, 21: 265-278.
21. Doğan, B. Ş. (2013). Asymmetric behavior of the exchange rate pass-through to manufacturing prices in Turkey. Emerging Markets Finance and Trade, 49(3): 35-47.
22. Edwards, S. (2006). The relationship between exchange rates and inflation targeting revisited. NBER Working Paper Series, 12163, 1-45.
23. Gagnon, J. E. ve Ihrig, J. (2004). Monetary policy and exchange rate pass-through. International Journal of Finance and Economics, 9, 315-338.
24. Hooker, M. (2002). Are oil shocks inflationary? Asymmetric and nonlinear specifications versus change in regime. Journal of Money, Credit and Banking, 34: 540-561.
25. Ito, T. ve Sato, K. (2008). Exchange rate changes and inflation in post-crisis Asian economies: Vector autoregression analysis of the exchange rate pass-through. Journal of Money, Credit and Banking, 40(7): 1407-1438.
26. Jooste, C. ve Jhaveri, Y. (2014). The determinants of time‐varying exchange rate pass‐through in South Africa. South African Journal of Economics, 82 (4), 603-615.
27. Kal, H., Arslaner, F., Arslaner, N. (2015). Sources of asymmetry and non-linearity in pass-through of exchange rate and import price to consumer price inflation for the Turkish economy during inflation targeting regime. Central Bank of the Republic of Turkey, Working Paper, (No. 15/30): 1-30.
28. Kara, H. ve Öğünç, F. (2008). inflation targeting and exchange rate pass-through: The Turkish experience. Emerging Markets Finance & Trade, 44 (6), 52–66.
29. Kara, H. ve Öğünç, F. (2012). Döviz kuru ve ithalat fiyatlarının yurt içi fiyatlara etkisi. İktisat İşletme ve Finans, 27 (317), 9-28.
30. Kara, H., Küçük, T., H., Özlale, Ü., Tuğer, B., Yücel, E. M. (2007). Exchange rate regimes and pass‐through: evidence from the Turkish economy. Contemporary Economic Policy, 25 (2), 206-225.
31. Karadaş, E., Mutluer, D., Özer, Y. B., Aysoy, C. (2008). Türkiye’de imalat sanayindeki firmaların fiyatlama davranışı. İktisat İşletme ve Finans, 23 (268), 7-34.
32. Kibritçioğlu, A. ve Kibritçioğlu, B. (1999). Ham petrol ve akaryakıt ürünü fiyat artışlarının Türkiye'deki enflasyonist etkileri. Başbakanlık Hazine Müsteşarlığı, EAGM AİD, No.21, 1-73.
33. Lagoa, S. (2017). Determinants of inflation differentials in the Euro area: Is the new keynesian phillips curve enough?. Journal of Applied Economics, 20 (1), 75-103.
34. Lee, J. ve Strazicich, M. C. (2003). Minimum lagrange multiplier unit root test with two structural breaks. Review of Economics and Statistics, 85 (4), 1082-1089.
35. Leigh, D. ve Rossi, M. (2002). Exchange rate pass-through in Turkey. International Monetary Fund, Working Paper, (02-204), 1-18.
36. Lopez-Villavicencio, A. ve Mignon, V. (2016). Exchange rate pass-through in emerging countries: Do the inflation environment, monetary policy regime and institutional quality matter? CEPII Working Paper, 113: 1-31.
37. McCarthy, J. (2000). Pass-Through of exchange rates and import prices to domestic inflation in some industrialized economies. FRB of New York Staff Report, 111: 1-28.
38. McFarlane, L. (2009). Time-Varying exchange rate pass-through: An examination of four emerging market economies. Bank of Jamaica, September: 1-28.
39. Mihaljek, D. ve Klau, M. (2008). Exchange rate pass-through in emerging market economies: what has changed and why? A Chapter in Transmission Mechanisms for Monetary Policy in Emerging Market Economies, 35: 103-130.
40. Mohanty, M. S. ve Klau, M. (2001). What determines inflation in emerging market economies? Bank for International Settlements Papers Chapters, 8, 1-38.
41. Nakajima, J. (2011). Time-Varying parameter VAR model with stochastic volatility: An overview of methodology and empirical applications. Monetary and Economic Studies, 29, 107-142.
42. Narayan, P. K. ve Popp, S. (2010). A new unit root test with two structural breaks in level and slope at unknown time. Journal of Applied Statistics, 37 (9), 1425-1438.
43. Nordstrom, A., Roger, M. S., Stone, M. M. R., Shimizu, S., Kisinbay, T., ve Restrepo, J. (2009). The role of the exchange rate in inflation: Targeting emerging economies. International Monetary Fund, Occasional Paper (No. 267): 1-36.
44. Primiceri, G. E. (2005). Time-Varying structural vector autoregressions and monetary policy. The Review of Economic Studies, 72 (3), 821-852.
45. Sekine, T. (2006). Time-Varying exchange rate pass-through: experiences of some industrial countries. BIS Working Paper, 202, 1-34.
46. Shioji, E. (2015). Time Varying pass-through: Will the yen depreciation help Japan hit the inflation target? Journal of The Japanese and International Economies, 37, 43-58.
47. Shioji, E. ve Uchino, T. (2010). Pass-Through of oil prices to Japanese domestic prices. National Bureau of Economic Research, (No. W15888), 1-45.
48. Steel, D. ve King, A. (2004). Exchange rate pass-through: the role of regime changes. International Review of Applied Economics, 18 (3): 301-322.
49. Taylor, J. B. (2000). Low inflation, pass-through, and the pricing power of firms. European Economic Review, 44, 1389-1408.
50. Utkulu, U. ve Ekinci, R. (2016). Uluslararasi petrol ve gıda fiyatlarından iç fiyatlara asimetrik ve doğrusal olmayan fiyat geçişkenligi: Türkiye için NARDL modeli bulguları. Finans Politik & Ekonomik Yorumlar, 53(617), 9.
51. Volkan, A., Saatçioğlu, C. ve Korap, L. (2007). Impact of exchange rate changes on domestic inflation: the Turkish experience. Turkish Economic Association Discussion Paper (2007-6), 1-11.
52. Walsh, C. E. (2009). Inflation targeting: What have we learned?. International Finance, 12 (2), 195-233.
53. Yahyaei, Q. I. A. (2010). The relevancy of the US dollar peg to the economies of the gulf cooperation council countries (GCC). PhD Thesis, Department of Economics, Faculty of Law, Business and Social Science, University of Glasgow: 1-429.
54. Yanıkkaya, H., Kaya, H., Akgul, D. (2015). Petrol fiyatlarının enflasyona geçişkenliği değişti mi? Central Bank Review, 15(3), 75-88.
55. Yüncüler, Ç. (2011). Pass-Through of external factors into price indicators in Turkey. Central Bank Review, 11 (2), 71-84.