Relationship between inflation and economic growth: The case of Türkiye

In this study, it is aimed to examine the relationship between inflation and economic growth in the example of Turkey. Data from the Central Bank of the Republic of Turkey (TCMB) Electronic Data Distribution System (EVDS) was used in the study (TCMB, 2023). In the study, quarterly inflation (CPI) and economic growth (change in GDP) variables between 2003 and 2023 were used. Time series techniques were used as an econometric method in the study. First of all, stationarity analysis was performed for the variables. For this analysis, the "Extended Dickey Fuller (ADF)" unit root test was used. "Granger Causality Analysis" was used to examine the causality relationship between the variables. Regression analysis was performed to examine the strength of the causality relationship. As the result of the ADF unit root test, the economic growth (GDP) series is stationary at the 5% significance level at level values, but the inflation (CPI) series is not stationary at level values, CPI data has been made stationary to the first degree. As a result of the Granger causality analysis, it was seen that there was a one-way causality relationship from inflation to growth. In other words, according to Granger causality analysis, inflation affects growth in Turkey. As a result of the one-sided test that inflation data affects economic growth, in the regression equation created, there is a negative relationship between growth and inflation since the inflation value is -0.14. In other words, a 1% inflation increase reduces growth by 0.14%. This result is consistent with the results obtained from most studies conducted for Türkiye.