Determinants of inflation in Turkey; NARDl test

Inflation is at the forefront of macroeconomic problems. Inflation, which has been on an increasing trend all over the world in recent years, has become a global problem.Therefore, determining the factors at the source of inflation is important in producing policies to combat inflation. The aim of this study is to analyze the factors affecting inflation for the period 2004M01-2021M10 in Turkey. In this context, the effects of oil prices, exchange rates, interest rates and credit volume on inflation were tested using the Non-LinearAutoregressive Distributed Lag(NARDL) method. According to the results of the analysis, decreases in the exchange rate increase inflation in the short term, while decreases in credit volume reduce inflation. The findings showed demand inflation in the short run. In the long run, while increases in oil prices, exchange rates and interest rates increase inflation, only decreases in interest rates decrease inflation. These results reveal that long-term inflation is cost-driven. The study presents findings that can increase the effectiveness of policies to combat inflation that can be implemented in the short and long term.