THE RELATIONSHIP BETWEEN DOMESTIC PRODUCER AND CONSUMER PRICES IN TURKEY: 2006-2018

Abstract

Today one of the most important macroeconomic variables is inflation. Therefore, the aim of this study is to examine the relationship between producer and consumer price indexes in Turkey. Toda Yamamoto's causality analysis is practised through the Eviews 10 package program as being used the monthly consumer price index and producer price index data for 2006: 1-2018-11 period. According to the results of the analysis, the one-way causality relationship that is towards to the consumer prices in the producer prices. This situation supports the supply-side approach, which considers that an increase in production costs will reflected in consumer prices over time and that cost-push inflation will occur. For this reason, policy makers should take measures to reduce the price increases in producer inflation. The result is suitable for the common view in the literature.