Major determinants of food price volatility in Turkey: inflation surge aftermath of 2016

Abstract

Food price index is a crucial indicator for the stability of overall economic conditions in emerging markets since it has a considerable weight in regular spending of households. In the last decade, Turkey experienced higher food price inflation compared to consumer price index. In this context our main purpose is to provide useful insight for policymakers and governors to manage food price inflation. This paper undertakes the analysis of volatility and volatility spillover between Turkey Food Price Index (Turkey), Dollar-TL exchange rate (USDTRY), Turkish Producer Price Index of Agricultural (TRAGRIINP) and Turkish Food Price Index (World). The monthly data set covers the period 1 January 2000–31 December 2020. The results indicate that the volatility spillover effect between Turkish food price index and world food price index is more significant compared to the return spillover effect. Also, our results indicate a significant volatility spillover effect between Turkish food price index, exchange rates and world food price index exist in the short run while the effect vanishes in the long run. However, in the long run the main indicator for Turkish food prices index is Production Price Index of Agricultural Products after 2016 which is the milestone for the food price index surge.