AXION Real Inflation Model for Türkiye: A Distributional and Decision-Based Mathematical Framework

This study introduces a novel mathematical framework for measuring real inflation in Türkiye, addressing the structural limitations of traditional Consumer Price Index (CPI)-based approaches. While official inflation measures provide an aggregate estimate of price changes, they fail to capture the heterogeneous and distributional nature of inflation experienced by households, firms, and economic segments. In high-volatility environments such as Türkiye, this divergence becomes structurally significant due to consumption heterogeneity, relative price movements, essential goods concentration, and expectation-driven pricing behavior. The proposed AXION Real Inflation Model extends the standard inflation framework by incorporating multiple adjustment layers, including consumption weight distortions, price dispersion effects, essential goods pressure (housing, food, transportation, energy), and behavioral dynamics driven by expectations and repricing frequency. Formally, real inflation is defined as a multi-component function rather than a single scalar variable, allowing the model to capture inflation as a distribution across economic agents. The framework is calibrated using multiple observed inflation indicators, including official CPI, metropolitan price indices, and alternative independent inflation estimates. The results demonstrate a systematic divergence between official and experienced inflation, with decision-relevant inflation levels significantly exceeding official CPI in certain segments of the economy. This study contributes to the literature by: redefining inflation as a distributional phenomenon, introducing a decision-based inflation metric, integrating structural and behavioral components into inflation measurement, providing a practical framework for corporate, financial, and policy applications. The model has direct applications in pricing strategies, wage adjustments, capital allocation, financial risk management, and macroeconomic policy analysis. Ultimately, this research argues that inflation should not be treated as a single statistical output, but as a dynamic, multi-layer system that directly impacts economic decision-making.