Econometric analysis of the reflection of the Covid-19 pandemic on the inflationist process in Turkey

Inflation reflects an increase in general price levels and a decrease in an individual's purchasing power. Although economists can predict some of the factors that affect inflation, sudden changes in a country's circumstances, such as wars, earthquakes, or pandemics, can disrupt the functioning of the system and hinder accurate forecasting. A pandemic affects a country's demand fluctuations, supply constraints, and price levels in various ways. The recent COVID-19 pandemic has resulted in inflation in developing countries such as Turkey. However, the cause of this increase has not been sufficiently explained during the pandemic. The objective of this study is to determine how exchange rates and gold prices, which are the main causes of inflation during the pandemic period, have influenced this increase. To achieve this goal, the consumer price index during the pandemic period covering 2020:01-2023:01 will be examined. A data set was created using variables for exchange rates and gold prices, and a co-integration analysis was conducted using the Johansen method. The presence of co-integration among the variables was detected. Subsequently, a Granger causality analysis was performed on this data set to identify a unidirectional causal relationship between the Consumer Price Index, which is a determinant of inflation, and the variables of Gold Prices and Exchange Rates. Additionally, the study findings have concluded a one-way causality relationship from the exchange rate variable to the gold prices variable.