Abstract:

In this study, the long-term relationship between inflation and international oil prices under multiple structural breaks in Turkey is analyzed using the data between 1960 and 2020. In this context, techniques, which multiple structural break unit root test suggested by Carrion-i-Silvestre et al. (2009) and multiple structural break cointegration test suggested by Maki (2012), were used. As a result of the cointegration analysis with multiple structural breaks, important structural break dates were obtained and, at the same time, the existence of a cointegration relationship between variables was determined, unlike Engle-Grang (1987) Cointegration Test results. FMOLS test results performed for the coefficient estimation show that a 1% increase in oil prices increases inflation by approximately 0.52% in the long-term. On the other hand, in the short-term, a 1% increase in oil prices increases inflation by approximately 0.35%. This results shows that oil price pass-through into inflation is moderate in long term under structural breaks in Turkey.

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