The effect of personal loans on consumer price index: The case of Turkey (2005-2020)

The purpose of this study is to analyze quarterly data for the 2005Q4-2020Q1 period of housing loans, vehicle loans, personal finance credits and personal credit cards of the impact on Consumer Price Index (CPI) using Johansen Multivariate Cointegration Test and VAR system estimation in Turkey. In this context, while the CPI is used as the dependent variable, housing loans, vehicle loans, personal finance credits, personal credit cards and total consumer loans are used as independent variables. In the study, three different models were analyzed in order to determine the relationship between variables. In the first model, in order to analyze the effect of total consumer loans on CPI, CPI is used as the dependent variable, while total consumer loans are used as an independent variable. In the second model, in order to determine the effect of each personal loans types on inflation separately, the CPI is the dependent variable, while the housing loans, vehicle loans and personal finance credits are considered as independent variables. In the third model, in order to analyze the effect of personal credit cards on CPI, CPI is used as the dependent variable, while personal credit cards is used as an independent variable. In addition, M2 money supply and real effective exchange rate variables are added to each model as control variables. According to the results obtained from the Johansen approach, there is no long-term relationship between variables. According to the impulse-response graphics and variance decomposition results obtained from the VAR system estimation, there is no relationship from personal loans types to CPI. Finally, according to the results of the Granger causality test conducted to determine the causality relationships between variables, there is no causality relationship between personal loans types and the CPI. On the other hand, while there is mutual causality between the money supply and the CPI, there is a one-way causality from the real effective exchange rate to the CPI. Keyword: Personal Loans, Consumer Price Index, Linear Time Series Analysis