Asymmetry and Regime Changes in Industrial Production: A Setar Analysis for Turkey

This study investigates the dynamics of the Turkish Industrial Production Index (IPI) in the post-2005 period within the framework of structural breaks and non-linear regime changes. The analysis examines IPI data through five distinct derivatives, including raw, calendar-adjusted, and seasonally adjusted forms. In cases where traditional unit root tests fall short, structural break tests clarify the stationarity characteristics of the series by modeling the shocks induced by the 2008 global crisis and the 2020 pandemic. To measure business cycles and growth momentum in industrial production, SETAR models—constructed using logarithmic first differences (growth rates)—provide empirical evidence that production exhibits radically asymmetric behaviors across low and high growth regimes. Specifically, in seasonally and calendar-adjusted series, it is observed that growth gains a strong, self-sustaining momentum once it exceeds a specific threshold. These findings invalidate the traditional linearity assumption and emphasize that policymakers should shift from uniform linear approaches toward flexible models that account for the prevailing growth regime when managing economic activity and crisis-related stimulus measures.