Akarsu, Okan and Aktuğ, Emrehan (2025) Decomposing supply- and demand-driven inflation in Turkey. Empirical Economics, 69 (2). pp. 1047-1077. ISSN 0377-7332 (Print) 1435-8921 (Online)
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Official URL: https://dx.doi.org/10.1007/s00181-025-02754-9
Abstract
We document the demand- and supply-driven components of inflation in Türkiye by following the decomposition method of Shapiro (J Money Credit Bank, 2024). The results suggest that the recent surge in inflation, which began with the COVID-19 pandemic and deviated significantly from global inflation rates, reaching as high as 80%, was initially driven by supply factors. As monetary policy loosened, demand-driven inflation also increased; however, throughout the post-COVID period, supply-driven inflation consistently exceeded the demand-driven component in this high-inflation environment. Consistent with theory, oil supply and exchange-rate shocks increased the supply-driven inflation, while monetary policy tightening reduced the demand-driven inflation. This decomposition can potentially serve as a useful real-time tracker for policymakers.
| Item Type: | Article |
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| Additional Information: | This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. |
| Uncontrolled Keywords: | Demand; Exchange rate pass-through; Inflation decomposition; Supply |
| Divisions: | Faculty of Arts and Social Sciences > Academic programs > Economics Faculty of Arts and Social Sciences |
| Depositing User: | Emrehan Aktuğ |
| Date Deposited: | 27 Aug 2025 15:44 |
| Last Modified: | 04 Dec 2025 11:20 |
| URI: | https://research.sabanciuniv.edu/id/eprint/51974 |
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