The Impact of Oil Price Shocks on the Consumer Price Components in Turkey: Evidence from TVP-VAR Models
Posted: 29 Nov 2017 Last revised: 25 Sep 2018
Date Written: November 24, 2017
This article aims to assess the extent of oil price pass-through into disaggregated consumer prices in Turkey in a time-varying framework. For this purpose, pass-through coefficients are computed based on the TVP-VAR model with stochastic volatility by Primiceri (2005). The results suggest that (a) oil prices have a significant impact on wholesale and consumer prices; (b) the responses follow time-varying pattern and differ markedly across the subcomponents of consumer prices, i.e. consumer energy, transportation and food prices are more sensitive to the changes in the oil prices; (c) the impact of exchange rate is found to be more significant and higher compared to that of oil prices; and (d) oil pass-through coefficients have declined remarkably after the 2008 Global Financial Crisis, whereas remarkable increases have been observed in the exchange rate pass-through coefficients since that time.
Keywords: Oil price pass-through, Exchange rate pass-through, TVP-VAR, Turkey
JEL Classification: C32, E31, E42, E58
Suggested Citation: Suggested Citation