Examining The Determinants of Food Prices in Türkiye with the SVAR Model

Yunus GÜLCÜ

Fiscaoeconomia, 2026, issue 1

Abstract: Food price volatility is critical to macroeconomic stability, income distribution, and social welfare in developing economies. In the Turkish economy, where a high percentage of households spend a large share of their income on food, food price volatility increases inflationary pressure and distorts income distribution. In this study, the determinants of food prices in Turkey for the period between January 2006 and January 2025 are analyzed in detail within the framework of the structural vector autoregression (SVAR) model. Within the scope of the study, the dynamic relationships between industrial production index, nominal effective exchange rate, oil prices and food prices are analyzed. The empirical findings indicate that the relationship between industrial production and food prices is rather weak. On the contrary, the exchange rate has a strong and statistically significant effect on food prices. Oil prices are found to have no direct effect on food prices. It has been revealed that a 1% increase in the exchange rate increases food prices by 0.046%. In addition, contrary to the expectations, industrial production did not have any disinflationary effect on food prices. The findings clearly reveal that the Turkish economy is vulnerable to exogenous shocks due to its high dependence on imported inputs. The impact of exchange rate movements on food prices is considered as a critical factor that should be taken into account in the formulation of economic policy decisions. In this context, the need to implement long-term structural reforms to reduce dependence on imported inputs was emphasized. In order to ensure price stability in Turkey's food sector, it is important to take strategic steps to address the exchange rate and import dependency. The results of the study suggest that reducing import dependency should be a prioritized objective in economic policies in terms of both price stability and reducing economic vulnerability.

Keywords: Food Prices; Exchange Rate; Industrial Production; Oil Prices; SVAR Model; Turkish Economy (search for similar items in EconPapers)
JEL-codes: C58 D31 F31 G17 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:260106

DOI: 10.25295/fsecon.1686832

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