Demand- and Supply-Driven Inflation Decomposition in Türkiye
| Title: | Demand- and Supply-Driven Inflation Decomposition in Türkiye | |
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Number: |
24/10 |
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Author(s): |
Okan Akarsu, Emrehan Aktuğ | |
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Language: |
English |
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Date: |
August 2024 |
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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 | |
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Keywords: |
Inflation decomposition, Demand, Supply, Exchange rate pass-through | |
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JEL Codes: |
E12; E24; E31; E52 | |