How do real and monetary integrations affect inflation dynamics?

Hülya Saygılı

International Economics, 2023, vol. 174, issue C, 18-27

Abstract: This paper examines the significance of real and monetary integrations for the inflationary dynamics of an emerging country, Turkey. The analysis accounts for 2-digit items of CPI inflation, which can be broadly categorized as tradable versus non-tradable and goods versus services. We find that a fall in the inflation gap between partner countries is mainly related to real integration whereas the co-movement of inflation is prominently driven by monetary policy co-movements. The product-type analysis shows that inflation gap in tradable items between trade partners shrinks and becomes more correlated with the (de)convergence and co-movement of real integration.

Keywords: Globalization; Inflation gap; Convergence; Co-movement; CPI sub-Items; Turkey (search for similar items in EconPapers)
JEL-codes: E31 F14 F4 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:174:y:2023:i:c:p:18-27

DOI: 10.1016/j.inteco.2023.02.001

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