Tradable and non-tradable inflation in Turkey: asymmetric responses to global factors

We contribute to the debate on the linkage between inflation regimes and globalization in several respects. First, we analyze consumer goods and services classified with respect to their tradability and content of intermediate imports. Second, we use 4-digit commodity-based price index data and the...

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Bibliographic Details
Published in:Empirical economics 2023-08, Vol.65 (2), p.973-1006
Main Authors: Saygılı, Hülya, Türkvatan, Aysun
Format: Article
Language:English
Subjects:
Central banks
Commodities
Consumer goods
Consumer Price Index
Currency
Econometrics
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Foreign exchange rates
Globalization
Imports
Inflation targeting
Insurance
International trade
Management
Openness
Price indexes
Probability
Statistics for Business
Citations: Items that this one cites
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Summary:We contribute to the debate on the linkage between inflation regimes and globalization in several respects. First, we analyze consumer goods and services classified with respect to their tradability and content of intermediate imports. Second, we use 4-digit commodity-based price index data and the official weights of items in the consumer basket in computations. Third, we explore which states of the reference indicators are more related to low, normal or high regimes of inflation. Regimes are determined using Markov regime-switching models. Probability score analysis compares the best matching of different regimes of inflation and reference indicators. Fourth, since we use commodity-based data we perform the analysis for an emerging country, Turkey, which has not only high trade openness and high global integration rate but also implements inflation targeting regime. Findings suggest that relevance of the reference indicators for predicting inflation depends on: the share of tradable items in the consumer basket, imported intermediate content of items in the consumer basket, the regime of inflation and invoicing currency.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-023-02364-3