Second-round effects of food prices on core inflation in Turkey
Turkey has recently experienced persistently high food inflation, among the highest in emerging markets, with food accounting for a significant proportion of consumer expenditures. This study investigates the second-round effects of food price shocks on core inflation using monthly data from January...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Sciendo
2024-12-01
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| Series: | Economics and Business Review |
| Subjects: | |
| Online Access: | https://doi.org/10.18559/ebr.2024.4.1485 |
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| Summary: | Turkey has recently experienced persistently high food inflation, among the highest in emerging markets, with food accounting for a significant proportion of consumer expenditures. This study investigates the second-round effects of food price shocks on core inflation using monthly data from January 2013 to June 2024 through a Bayesian Structural Vector Autoregressive (SBVAR) model. Incorporating domestic and international macroeconomic variables, the model identifies second-round effects by imposing theory-based constraints and leveraging Bayesian methods. Results reveal that core inflation reacts strongly to food price shocks, with rising food prices worsening inflation expectations and amplifying second-round effects on overall inflation. Historical decomposition reveals a more persistent impact of food price shocks on core inflation and expectations post-COVID-19. These findings underscore the importance of closely monitoring food price dynamics to safeguard price stability in Turkey, highlighting their critical role in shaping inflationary pressures. |
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| ISSN: | 2450-0097 |