The effects of electricity price changes on prices of other goods and services – evidence from Turkey

Abstract

This article employs a Factor-Augmented Vector Autoregressive model to assess the effects of electricity price innovations on prices of other goods and services. Using monthly series from Turkish Domestic Producer Price Index (D-PPI) and Harmonized Index of Consumer Prices (HICP) components, the results from the analyses on D-PPI components suggest that (i) Machinery & Equipment (not elsewhere classified); Electrical Equipment; and Rubber & Plastic Products increase the most, while (ii) Tobacco Products; Crude Petroleum & Natural Gas; and Water Supply, Sewerage, Waste Management & Remediation Services increase the least. In addition, the results from the analyses on HICP components suggest that (iii) Housing, Water, Electricity, Gas & Other Fuels; Furnishings, Household Equipment & Maintenance; and Restaurants & Hotels increase the most, while (iv) Communications; Alcoholic Beverages, Tobacco & Narcotics; and Education increase the least.