The Impact of Uncertainties on Inflation Using Time-Varying Causality Approach: Evidence from Türkiye

Year 2024, , 222 - 243, 28.01.2024

Oğuz Tümtürk , Mustafa Kırca

https://doi.org/10.25295/fsecon.1378532

Abstract

This paper investigates the causal relationship from uncertainties to inflation in the case of Türkiye. To that end, we first apply the constant parameter Granger causality test. Later, considering the fact that estimated coefficients can change under the presence of structural breaks, we also conduct the time-varying Granger causality analysis which allows the coefficients to differ over time. According to the results drawn from time-varying causality analysis, uncertainties in the Turkish economy have predictive powers on inflation. This result is resistant to the different selection of window sizes and employed constant or time-varying causality tests. The causal channel from uncertainties to inflation coincides with the time periods when uncertainties are at relatively lower or higher levels. Finally, inflation itself can be a source of uncertainties in the Turkish economy. The causality from inflation to uncertainties appears when severe inflation shocks occur.

Keywords

Uncertainty, Inflation, Causality

Belirsizliklerin Enflasyon Üzerindeki Etkisinin Zamanla Değişen Nedensellik Yöntemiyle Analizi: Türkiye Örneği

Abstract

Bu çalışma, Türkiye ekonomisindeki belirsizliklerden enflasyona doğru olan ilişkiyi nedensellik analizi çerçevesinde incelemektedir. Bu amaçla, öncelikle tüm analiz dönemi içinde parametrelerin zaman içinde değişmediğini varsayan sabit parametreli Granger nedensellik testi uygulanmıştır. Daha sonra yapısal kırılmaların varlığı altında katsayıların kolayca değişebileceğinden hareketle, katsayıların zaman içinde değişmesine olanak sağlayan Zamanla Değişen Granger nedensellik analizine başvurulmuştur. Zamanla değişen nedensellik analizi sonuçlarına göre, Türkiye ekonomisindeki belirsizliklerin enflasyonu tahmin etme gücü vardır. Bu sonuç sabit parametreli veya zamanla değişen nedensellik testlerine veya seçilen farklı pencere genişliklerine göre dirençlidir. Türkiye’de belirsizliklerden enflasyona doğru hareket eden nedensellik ilişkisi, belirsizliğin görece oldukça düşük veya yüksek olduğu dönemlerde ortaya çıkmaktadır. Son olarak, enflasyon da bizzat Türkiye ekonomisindeki belirsizliklerin kaynağı olabilmektedir. Enflasyondan belirsizliklere doğru nedensellik ilişkisi ise sert enflasyon şoklarının yaşandığı periyotlarda görülmektedir.

Keywords

Belirsizlik, Enflasyon, Nedensellik

References

• Abakah, E. J. A., Tiwari, A. K., Adekoya, O. B. & Oteng-Abayie, E. F. (2023). An Analysis of the Time-Varying Causality and Dynamic Correlation Between Green Bonds and US Gas Prices. Technological Forecasting and Social Change, 186, 122134. https://doi.org/10.1016/j.techfore.2022.122134
• Alam, M. R. (2015). Economic Policy Uncertainty in the US: Does It Matter for Canada?. Economics Bulletin, 35(4), 2725-2732.
• Alam, M. R. & Istiak, K. (2020). Impact of US Policy Uncertainty on Mexico: Evidence from Line-ar and Nonlinear Tests. Quarterly Review of Economics & Finance, 77, 355-366.
• Alexopoulos, M. & Cohen, J. (2009). Uncertain Times, Uncertain Measures. University of Toronto, Department of Economics Working Paper, No.325.
• Altıntaş, N., Kırca, M., Acar, S., Aydın, A. & Öztürk, M. (2022). Time-Varying Causality Between Income Inequality and Ecological Footprint in Turkey. Environmental Science and Pollution Research, 30(5), 11785-11797. https://doi.org/10.1007/s11356-022-22910-3
• Andrews, D. W. K. (1993). Tests for Parameter Instability and Structural Change with Unknown Change Point. Econometrica, 61, 821-856.
• Andrews, D. W. K. & Ploberger, W. (1994). Optimal Tests When a Nuisance Parameter is Present Only Under the Alternative. Econometrica, 62, 1383-1414.
• Apergis, N., Gavriilidis, K. & Gupta, R. (2023). Does Climate Policy Uncertainty Affect Tourism Demand? Evidence from Time-Varying Causality Tests. Tourism Economics, 29(6), 1484-1498. https://doi.org/10.1177/13548166221110540
• Arabacı, Ö. & Özdemir, M. (2020). Türkiye’de Tüketici Güveni ve Döviz Kuru İlişkisi. TESAM Akademi Dergisi, 7(1), 231-248. https://doi.org/10.30626/tesamakademi.618904
• Arslanturk, Y., Balcilar, M. & Ozdemir, Z. A. (2011). Time-Varying Linkages Between Tourism Receipts and Economic Growth in a Small Open Economy. Economic Modelling, 28(1-2), 664-671. https://doi.org/10.1016/j.econmod.2010.06.003
• Baker, S., Bloom, N. & Davis, S. (2013). Measuring Economic Policy Uncertainty. Chicago Booth Paper, No. 13-02.
• Balcilar, M., Ozdemir, Z. A. & Arslanturk, Y. (2010). Economic Growth and Energy Consumption Causal Nexus Viewed through a Bootstrap Rolling Window. Energy Economics, 32(6), 1398-1410. https://doi.org/10.1016/j.eneco.2010.05.015
• Bloom, N. (2009). The Impact of Uncertainty Shocks. Econometrica, 77(3), 623-685.
• Boratav, K. (2019). Sermaye Hareketleri ve Türkiye’nin Beş Krizi. Çalışma ve Toplum, 60, 311-324.
• Brooks, C. & Hinich, M. J. (1998). Episodic Nonstationarity in Exchange Rates. Applied Economics Letters, 5(11), 719-722. https://doi.org/10.1080/135048598354203
• Caggiano, G., Castelnuovo, E. & Groshenny, N. (2013). Uncertainty Shocks and Unemployment Dynamics: An Analysis of Post-WWII US Recessions. Marco Fanno Working Paper N.166, University of Padova.
• Caldara, D., Fuentes-Albero, C., Gilchrist, S. & Zakrajšek E. (2016). The Macroeconomic Impact of Financial and Uncertainty Shocks. European Economic Review, 88, 185-207.
• Carroll, C. (1996). Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis. NBER Working Paper No. 5788.
• Caspi, I. (2017). Rtadf: Testing for Bubbles with EViews. Journal of Statistical Software, 81(Code Snippet 1), 1-16. https://doi.org/10.18637/jss.v081.c01
• Colombo, V. (2013). Economic Policy Uncertainty in the US: Does it Matter for the Euro Area?. Economics Letters, 121(1), 39-42.
• Coronado, S., Gupta, R., Nazlioglu, S. & Rojas, O. (2023). Time‐Varying Causality Between Bond and Oil Markets of the United States: Evidence from Over One and Half Centuries of Data. International Journal of Finance & Economics, 28(3), 2239-2247. https://doi.org/10.1002/ijfe.2534
• Dogan, E., Majeed, M. T. & Luni, T. (2022). Analyzing the Nexus of COVID-19 and Natural Resources and Commodities: Evidence from Time-Varying Causality. Resources Policy, 77, 102694. https://doi.org/10.1016/j.resourpol.2022.102694
• Eroglu, İ. & Yeter, F. (2022). Time-Varying Causality Between Money Supply Growth and Inflation: New Evidence from Turkey. Applied Economics Letters, 1-5. https://doi.org/10.1080/13504851.2022.2159007
• Fromentin, V. (2022). Time-varying Causality Between Stock Prices and Macroeconomic Fundamentals: Connection or Disconnection?. Finance Research Letters, 49, 103073. https://doi.org/10.1016/j.frl.2022.103073
• Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424. https://doi.org/10.2307/1912791
• Hacker, R. S. & Hatemi-J, A. (2006). Tests for Causality Between Integrated Variables Using Asymptotic and Bootstrap Distributions: Theory and Application. Applied Economics, 38(13), 1489-1500. https://doi.org/10.1080/00036840500405763
• Hong, Y., Wang, L., Ye, X. & Zhang, Y. (2022). Dynamic Asymmetric Impact of Equity Market Uncertainty on Energy Markets: A Time-Varying Causality Analysis. Renewable Energy, 196, 535-546. https://doi.org/10.1016/j.renene.2022.07.027
• Karabacak, M. & Meçik, O. (2022). Analysing the Tax Structure of Turkish Economy: A Time-Varying Causality Analysis. Sosyoekonomi, 30(51), 149-164. https://doi.org/10.17233/sosyoekonomi.2022.01.08
• Karagöl, V. (2023). Ekonomik Politika Belirsizliğinin Gıda Fiyatlarına Etkisi: Seçilmiş Ülkeler İçin Zamanla Değişen Nedensellik Analizi. Journal of Economic Policy Researches/İktisat Politikası Araştırmaları Dergisi, 10(2), 409-433. https://doi.org/10.26650/JEPR1212094
• Kaya, L. (2020). Türkiye’de Tüketici Güven Endeksi ile Döviz Kuru Arasındaki İlişki: Fourier Fonksiyonları Yaklaşımı. Finans Ekonomi ve Sosyal Araştırmalar Dergisi, 5(4), 598-608. https://doi.org/10.29106/fesa.756071
• Kazak, H., Uluyol, B., Akcan, A. T. & İyibildiren, M. (2023). The Impacts of Conventional and Islamic Banking Sectors on Real Sector Growth: Evidence from Time-Varying Causality Analysis for Turkiye. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2023.09.004
• Leduc, S. & Liu, Z. (2016). Uncertainty Shocks Are Aggregate Demand Shocks. Journal of Monetary Economics, 82, 20-35.
• Nodari, G. (2014). Financial Regulation Policy Uncertainty and Credit Spreads in the US. Journal of Macroeceonomics, 41, 122-132.
• Perron, P. (1989). The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis. Econometrica, 57(6), 1361. https://doi.org/10.2307/1913712
• Phillips, P. C. B. & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75(2), 335. https://doi.org/10.2307/2336182
• Raifu, I. A. (2023). Examining Structural Stability and Time-Varying Causality between Economic Policy Uncertainty and Asia-Pacific Islamic Stock Price. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4319570
• Said, S. E. & Dickey, D. A. (1984). Testing for Unit Roots in Autoregressive-Moving Average Models of Unknown Order. Biometrika, 71(3), 599. https://doi.org/10.2307/2336570
• Sims, C. A. (1980). Macroeconomics and Reality. Econometrica, 48(1), 1. https://doi.org/10.2307/1912017
• Sunday Adebayo, T., Saint Akadiri, S., Haouas, I. & Rjoub, H. (2023). A Time-Varying Analysis between Financial Development and Carbon Emissions: Evidence from the MINT Countries. Energy & Environment, 34(5), 1207-1227. https://doi.org/10.1177/0958305X221082092
• Tang, C. F. (2008). Wagner’s Law versus Keynesian Hypothesis: New Evidence from Recursive Regression-Based Causality Approaches. The IUP Journal of Public Finance, 6(4), 29-38.
• Toda, H. Y. & Yamamoto, T. (1995). Statistical Inference in Vector Autoregressions with Possibly Integrated Processes. Journal of Econometrics, 66(1-2), 225-250. https://doi.org/10.1016/0304-4076(94)01616-8
• Türkiye Cumhuriyet Merkez Bankası Elektronik Veri Dağıtım Sistemi. (2022a). Fiyat Endeksi (Tüketici)(2003=100)(TÜİK)(Aylık, Yüzde Değişim). https://evds2.tcmb.gov.tr/index.php?/evds/serieMarket
• Türkiye Cumhuriyet Merkez Bankası Elektronik Veri Dağıtım Sistemi. (2022b). Tüketici Güven Endeksi. https://evds2.tcmb.gov.tr/index.php?/evds/dashboard/4985
• Ulug, M., Işık, S. & Mert, M. (2023). The Effectiveness of Ultra-Loose Monetary Policy in a High Inflation Economy: A Time-Varying Causality Analysis for Turkey. Economic Change and Restructuring, 56(4), 2855-2887. https://doi.org/10.1007/s10644-023-09535-3
• Wang, K.-H., Su, C.-W., Umar, M. & Peculea, A. D. (2023). Oil Prices and the Green Bond Market: Evidence from Time-Varying and Quantile-Varying Aspects. Borsa Istanbul Review, 23(2), 516-526. https://doi.org/10.1016/j.bir.2022.12.003
• Yılmaz, K. Ç. (2022). Dolarizasyon ve Döviz Kuru Arasındaki Zamanlar Arası Değişen Nedensellik İlişkisi. Business & Management Studies: An International Journal, 10(1), 163-175. https://doi.org/10.15295/bmij.v10i1.1982
• Zivot, E. & Andrews, D. W. K. (1992). Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis. Journal of Business & Economic Statistics, 10(3), 251. https://doi.org/10.2307/1391541