The Relationship between Consumer Price and Producer Price Indices in Turkey

Ülke, Volkan and Ergun, Ugur (2013): The Relationship between Consumer Price and Producer Price Indices in Turkey. Published in: International Journal of Academic Research in Economics and Management Sciences , Vol. vol. 3, No. No. 1 (22 February 2014): pp. 205-2022.

Abstract

In this study we analyze the relationship between the Consumer Price Index (CPI) and the Producer Price Index (PPI) in Turkey. We test long run, short run and causality relationship of these series. Johansen’s cointegration tests present a long run relationship between these series. Vector error correction (VEC) model specification suggests these series move together. There is a unidirectional long run causality from CPI to PPI. On the other hand VEC Granger causality test indicates no causality in short run. Thus our results suggest demand pull inflation in long run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cointegration, Vector error correction model and Price indices
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation

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