Profit produced by post-pandemic inflation: Evidence from an emerging economy

Sayim Isik, Mehmet Mert and Mehmet Ulug

Structural Change and Economic Dynamics, 2025, vol. 72, issue C, 233-244

Abstract: This paper focuses on the post-pandemic inflationary context, providing further details on how rising corporate profits contribute to the inflationary process in Türkiye. Using quarterly data from 2010 to 2022, we extend the existing literature by employing the Quantile ARDL method to assess the roles that both cost-push and demand-pull factors play in post-pandemic inflation. The chosen empirical strategy is motivated by the main objective of the study, as it allows us to quantify how the factors contributing to inflationary process differ when comparing periods of high inflation (higher quantiles) with periods of low inflation (lower quantiles). The empirical findings support the idea that the drivers of Turkish inflation are context-dependent, with specific causes emerging during inflationary episodes. The results show that cost-push factors, rather than demand-pull factors, are the main cause of the post-pandemic inflation surge in Türkiye. Our estimation results show that the coefficient for interest rates in Türkiye is only -0.42 %, while the corresponding figure for the profit share is 5.26 %, indicating that the effect of the profit share is 12 times greater than that of interest rate. We also find evidence of conflict and profit-driven inflation, confirming that the post-pandemic inflation surge in Türkiye is largely driven by cost-push factors and rising profits.

Keywords: Inflation; Profits; Cost-push; Demand-pull; Q-ARDL (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:72:y:2025:i:c:p:233-244

DOI: 10.1016/j.strueco.2024.10.002

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