Contribution of Corporate Profits to Inflation in Türkiye after Covid-19

Abstract

In the wake of the Covid-19 pandemic, there was a major cost of living crisis in the world while corporate profits reached historical records. Words such as “sellers’ inflation”, “greedflation” have become increasingly popular all over the world. While Türkiye is experiencing the highest inflation in 2022 in her late history, she remained disconnected with those discussions until very recently. This study tries to shed light on the developments in inflation and unit profits during the pandemic period in Türkiye by using the GDP deflator decomposition method. As far as we know, the study will be the first attempt in Türkiye in terms of the methodology used. The findings show that the highest contribution to inflation in Türkiye during the pandemic period arose from the increase in unit profits. In this framework, it is determined that the sectors that contribute the most to domestic inflation are the manufacturing industry, transportation, and the trade sectors. Although the GDP deflator decomposition method does not provide information on the causality between inflation and unit profits, the findings suggest that the corporate sector in Türkiye cannot be labeled as the victim of the inflation wave during the pandemic, but rather the profiting from the process. The share of income received by the corporate sector in the pandemic reached an all-time high, while the percentage share received by the employee fell to historic lows.