The effect of simultaneous supply and demand shocks on macroeconomic variables: The example of Turkey

Shocks in the economy affect many macroeconomic variables. These shocks are divided into two as supply and demand shocks according to the Blanchard and Quah approach in terms of their impact on GDP. In addition to these shocks, nominal shocks were also handled, and fluctuations in GDP were analyzed using Vector Autoregression (VAR) analysis. The data of the variable used in the study were obtained from the Electronic Data Distribution System (EVDS) of the Central Bank of the Republic of Turkey (CBRT) official site, as quarterly data from 1999Q1-2020Q4. According to the results obtained, when the Turkish economy is analyzed in terms of its impact on GDP between 1999Q1-2020Q4, it is understood that supply shocks are dominant in the short and long term. Although the effects of demand shocks are partially seen in addition to supply shocks in the short term, it is concluded that the effect decreases over time and this effect remains at very low levels in the long term. However, the analysis shows that the effect of nominal shocks on GDP in the short and long run is very low. Keywords: Supply Shocks, Demand Shocks, GDP, Vector Autoregression (VAR) Analysis, Turkish Economy.