Dynamics of post-pandemic inflation in Türkiye

Abstract

In the post-pandemic period, Turkish inflation increased to levels last seen in the 1990s. Both the average level and dynamics of inflation in Türkiye were different from inflation in other Emerging European countries. This study employs a six-variable Bayesian vector autoregression (BVAR) model with stochastic volatility to estimate the historical decomposition of inflation in Türkiye during the post-pandemic period. The findings suggest that this period can be divided into two distinct episodes: from November 2021 to May 2023, inflation was driven by both domestic and global factors, with domestic ones being more dominant. From June 2023 onwards, inflation accelerated entirely by domestic factors.