Pass-through of external shocks to inflation: Turkey examination

The influence of external shocks on domestic price has been rising day by day in the globalizing world. In particular, the foreign dependency of developing countries like Turkey on inputs such as raw materials, intermediate goods, investment goods and energy makes them more vulnerable to external shocks. At the same time, Central banks aiming at price stability adopt the inflation rate as the nominal anchor. In this regard, the pass-through of external shocks to inflation is crucial for central banks to achieve their inflation targets. In this context, the thesis' major goal is to investigate the pass-through of exchange rates, oil prices, and output gap factors on inflation in short and long run as an external shocks Turkey after the global financial crisis of 2008. The impact of external shocks such as the exchange rate, oil prices, and output gap factors on inflation have been studied asymmetrically using the nonlinear autoregressive distributed lag method. The presence of an asymmetric link between the variables in the long run has been shown as a result of the research. The acquired results have been confirmed to be compatible with economic theory.