Drivers of inflation in Turkey: a new Keynesian Phillips curve perspective

Mustafa Kocoglu

Economic Change and Restructuring, 2023, vol. 56, issue 4, No 26, 2825-2853

Abstract: Abstract The main goal of this study is to investigate the determinants of inflation in Turkey within the framework of the new Keynesian Phillips curve using monthly data from 2000:M1 to 2021:M10. The results show that the production gap has a significant negative effect on inflation across all distributions, while aggregate expenditures trigger CPI inflation. This study reports that crude oil price asymmetries have a positive and marginal effect on the CPI inflation distribution. In addition, exchange rates display a positive effect on the CPI inflation distribution. With the increase in global economic activities, the completion of the production gap with imports is the main factor in evaluating whether economic activities will turn into inflation pressure. From this point of view, our findings show that the transmission mechanism of output gaps and international oil prices to CPI inflation is nonlinear in the context of the new Keynesian Phillips curve.

Keywords: Asymmetry; CPI inflation; New Keynesian Phillips curve; Oil prices; Output gap; Turkey (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10644-023-09532-6

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