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

See all articles by Abdurrahman Nazif Catik

Abdurrahman Nazif Catik

Ege University Department of Economics

Mehmet Karacuka

Ege University - Faculty of Economic and Administrative Sciences

A. Ozlem Onder

Ege University - Department of Economics

Date Written: November 24, 2017

Abstract

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

Catik, Abdurrahman Nazif and Karacuka, Mehmet and Onder, A. Ozlem, The Impact of Oil Price Shocks on the Consumer Price Components in Turkey: Evidence from TVP-VAR Models (November 24, 2017). Available at SSRN: https://ssrn.com/abstract=3076891 or http://dx.doi.org/10.2139/ssrn.3076891

Abdurrahman Nazif Catik (Contact Author)

Ege University Department of Economics ( email )

Bornova, Izmir 35100
Turkey

HOME PAGE: http://akademik.ege.edu.tr/?q=en/bilgiler&id=3270

Mehmet Karacuka

Ege University - Faculty of Economic and Administrative Sciences ( email )

Bornova, Izmir 35100
Turkey

A. Ozlem Onder

Ege University - Department of Economics ( email )

Bornova, Izmir 35040
Turkey
+90 232 343 40 00/5287 (Phone)
+90 232 3734194 (Fax)

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