Demand-and Supply-Driven Inflation Decomposition in Turkiye

Okan Akarsu and Emrehan Aktug

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: We document the demand and supply driven components of inflation in Türkiye following the decomposition of Shapiro (2022). The results suggest that the recent acceleration in inflation starts with supply-driven inflation, but over time it transitioned into an inflationary environment driven by demand. Consistent with the theory, oil-supply and exchange rate shocks act to increase the supply-driven contribution, whereas monetary policy tightening acts to reduce the demand-driven contribution of inflation. This decomposition can potentially be a useful real-time tracker for policymakers.

Keywords: Inflation decomposition; Demand; Supply; Exchange rate pass-through (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 E52 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2410

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