Abstract:

Producer price index and consumer price index generally move similar to each other in time. However, when the period of 1987-2012 for Turkish economy is analyzed, it is observed that after 2003, the movements of the two indices have significantly differ from each other. The aim of this study is to investigate the probable relationship between two indices that may vary depending of time and, is to determine the transitivity degree between indices for Turkish Economy. The data used in this study cover the period of 1987-2012. In order to determine the transitivity between indices, Kalman Filter Technique was used and the elasticity values were get for each period. Then, the degree of the transitivity between indices was investigated and interpreted. The empirical findings imply the following generalizations: After 2003, the coefficients that give dynamic relationship from producer price index to consumer price index decrease. This means that the transitivity from producer index to consumer index decreases in the period 2003-2012. Therefore, especially in recent years, the extraordinary transitivity must be considered for the assessment of the inflationary process in Turkey.

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