Ömer Kalav – Eklektik

Özet

This paper examines the relationship between exchange rate pass-through (ERPT) and
inflation within dynamic structure, focusing on the impact of exchange rate changes
on consumer prices (CPI) in Türkiye. The theoretical and empirical analysis builds
on existing frameworks, considering how central banks’ reactions to exchange rate
movements play a crucial role in shaping inflationary dynamics. The study uses the
ARDL model to analyse the long-term and short-term effects of exchange rate fluctuations
on inflation, focusing on the interaction between the CPI and the nominal
exchange rate (NEX). For these goals, we employed monthly data over the January of
2000 and August of 2024.

The analysis is based on two baseline models: the first examines how changes in the
exchange rate directly impact the CPI, while the second assesses the rate of change in
inflation due to exchange rate variations. Stationarity of the data is ensured through
unit root testing, which confirms the appropriateness of using the ARDL model. The
results reveal that exchange rate movements significantly affect CPI, with a 1% increase
in the exchange rate leading to a 1.1625% increase in th e CPI in the long run,
as evidenced by a p-value of 0.00. Additionally, in the short term, a 1% increase in
the exchange rate results in a 0.1164% rise in the CPI, indicating a persistent effect
on prices. The error correction term further supports the existence of a significant
relationship between the CPI and the exchange rate in both short and long-term dynamics.
Based on model 2, exchange rate changes have a significant effect on inflation
in the long-term relationship. In particular, it has been shown that exchange rate
increases can lead to long-term increases in inflation.

Aralık 2024
Cilt 2, Sayı 2

Inflation and Exchange Rate Pass-Through

Aralık 2024 Cilt 2, Sayı 2

Inflation and Exchange Rate Pass-Through

Aralık 2024
Cilt 2, Sayı 2