Examination of the nonlinear relationship between, exchange rate, oil prices and the food prices in Turkey: time-varying parameter VAR (TVP-VAR) models

ABSTRACT

In this study, the time-varying dynamic relationships among real exchange rate, average real oil price and food inflation is investigated in Turkey during the period of 20061-202112. For this reason, TVP-VAR models are applied. The findings from this study revealed that the pass-through effect of real exchange rate on food inflation increases rapidly during the COVID-19 pandemic, and this effect reaches the highest level in October 2021 in which the fluctuations in exchange rate occured. Besides, it is detected that raises in average oil prices significantly enhance food inflation since the vaccination proccess, starting in early 2021, has caused increases in production and demand.