Exchange Rate Pass-Through In Turkey: ARDL Bounds Testing Approach

With the implementation of inflation targeting regime, it is expected that the exchange rate pass-through will tend to decrease.This study analyzes Turkey's pass-through effect by the autoregressive distributed lag (ARDL) bounds testing approach for the periods 2002M01-2010M12 and 2011M01-2019M12 with a comparative perspective.According to our study's findings, exchange rates and import prices in Turkey have been positively affected consumer prices in the 2002M01-2010M12 and 2011M01-2019M12 periods, in terms of both long and short term relationships.On the other hand, total industrial production affected consumer prices only in 2011M01-2019M12.This effect was positive for long-term relations and negative for short-term relations.Another significant issue is; long-term effects of the exchange rate and import prices on consumer prices are twice as high in exchange rates and 0.54 times higher in import prices in the 2002M01-2010M12 period compared to the 2011M01-2019M12 period.