This study explores the impact of exchange rate changes on Turkish food prices and their sub-categories using a monthly dataset from 2005:M1 to 2026:M1. Empirical evidence from the Vector Error Correction model indicates that a 1% depreciation of the Turkish Lira translates into a 1.15% increase in general food prices over the long run. Consequently, the estimated pass-through elasticity on food prices exceeds the threshold of “complete pass-through”. This result can be attributed to: i) the price increase stemming from the rise in import prices; ii) the deterioration of inflation expectations and fears of economic agents regarding replacement costs; iii) menu costs; and iv) opportunistic price-setting behaviors. A decomposition into food sub-categories reveals that all food items exhibit a high degree of sensitivity to exchange rates, irrespective of their level of import dependency. We also conducted robustness tests, confirming that our findings remain consistent and show no substantial deviations.
Oğuz Tümtürk (Wed,) studied this question.