A Cost-based Empirical Model of the Aggregate Price Determination for the Turkish Economy: A Multivariate Cointegration Approach

Authors

  • Fatma Zeren Istanbul University, Department of Econometrics, Turkey
  • Levent Korap Istanbul University, Institute of Social Sciences, Turkey

DOI:

https://doi.org/10.2298/PAN1002173Z

Keywords:

Aggregate consumer prices, Cointegration, Turkish economy

Abstract

This paper tries to examine the long run relationships between the aggregate consumer prices and some cost-based components for the Turkish economy. Based on a simple economic model of the macro-scaled price formation, multivariate cointegration techniques have been applied to test whether the real data support the a priori model construction. The results reveal that all of the factors, related to the price determination, have a positive impact on the consumer prices as expected. We find that the most significant component contributing to the price setting is the nominal exchange rate depreciation. We also cannot reject the linear homogeneity of the sum of all the price data as to the domestic inflation. The paper concludes that the Turkish consumer prices have in fact a strong cost-push component that contributes to the aggregate pricing.

Key words: Aggregate consumer prices, Cointegration, Turkish economy.
JEL: C32, C51, E31.

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Published

2010-10-10

How to Cite

Zeren, F., & Korap, L. (2010). A Cost-based Empirical Model of the Aggregate Price Determination for the Turkish Economy: A Multivariate Cointegration Approach. Panoeconomicus, 57(2), 173–188. https://doi.org/10.2298/PAN1002173Z

Issue

Section

Scientific review