Asymmetric Effects of Exchange Rate on Inflation in Turkey: What Aggregated and Disaggregated Data Reveal

The relationship between inflation and exchange rate in the Turkish economy is remarkable. While indirect effects of on occur through cost channel, direct emerge consumption channel. In addition, changes affect pricing decisions indexing This study examines general certain subcomponents for 2003Q1-2020Q1. For this purpose, it uses linear nonlinear ARDL models. model results, while short-term at different rates, long-term are more robust. According to estimation results model, movements (increase-decrease) short run cause similar rates prices. findings indicate that primary determinant inflation. long run, effect substantial. Moreover, asymmetries striking. increases reflected prices, decreases insignificant. fact observed term can be explained by upward trend rate. strong also weakens effectiveness monetary policy. order conduct an effective policy, necessary solve structural problems improve production structure. economic policy should consider stability