Econometric analysis of the relationship between inflation and fluctuations in agricultural and food prices prices

It is known that agriculture and food products have an important role in the economy. In recent years, price changes of agricultural and food products, which affect the economy, have started to attract more attention of researchers and politicians and have led them to conduct studies. In these studies, many factors that cause an increase in the prices of agricultural and food products have been determined. The most important of these factors are; inflation, real effective exchange rate and oil prices. As long as the factors affecting the price in our study do not change, it is highly probable that there will be a real increase in the prices of agricultural and food products in the long run. In this sense, it is important to examine and follow the relationship between the prices of agricultural and food products and the variables affecting these prices. The aim of this study is to analyze the relationship between inflation and fluctuations in agricultural and food prices for the Turkish economy. The data used in the analysis; inflation and food products consumer price index, oil prices, real effective exchange rate (CPI-based) and agricultural products producer price index. First of all, the stationarity levels of the variables discussed were examined and it was determined that they were stationary at the first difference. From this point of view, ARDL bounds test approach was applied to examine the long-term relationship between the variables. It has been determined that there is a co-integration relationship in the boundary test approach. Afterwards, VAR analysis was applied to measure the interaction between the variables. In order to measure what percentage of the changes in the variances of each variable is explained by its own lag and what percentage is explained by other variables, variance decomposition method was applied for each variable separately, and impulse-response analysis was applied to measure the effect of an endogenous variable against shocks in error terms. According to the analysis, the effect of the %1 standard deviation shock given to Tufe on itself showed a decreasing trend in the first 3 periods, but gradually disappeared in the following periods. Finally, in the study, Granger causality analysis was carried out to measure the interaction of the variables with each other, and as a result, causality relations from oil prices to consumer price index, from exchange rate to consumer price index, from consumer price index to agricultural product prices, from food product prices to agricultural product prices and from oil prices to agricultural product prices were determined. Keywords: ARDL Bounds Test, VAR Analysis, Variance Decomposition, Impact – Response Analysis, Granger Causality Test