An ARDL model analysis of the determinants of food price inflation in Türkiye

Food price inflation has received much attention

in Türkiye amidst the current skyrocketing food prices. Because of the relatively

large share of food products in the consumer basket (25.32%) in Türkiye, stabilizing

food prices is a prerequisite for controlling the overall headline inflation

and promoting the welfare of the population. To this end, we employ the Granger

causality analysis and the Autoregressive Distributed Lag (ARDL) model on

monthly data from January 2015 to December 2022 to examine the demand-pull and

cost-push determinants of food price inflation in Türkiye. On the demand side, food

exports, government expenditures, and money supply; and on the supply side, agricultural

input prices, agricultural GDP, and food imports play key roles in determining

the short- and long-run movement of Türkiye’s food prices. Exchange rates considered

as both a demand and supply side factor also significantly influence the movement

of food prices in Türkiye. These findings suggest that stabilizing the exchange

rates, controlling the money supply, importing food items to fill the gap in

domestic production, increasing investment in agricultural production, and promoting

domestic production of agricultural inputs to reduce the dependency on imports

could play a role in reducing food price inflation in Türkiye.