ANALYSIS OF TIME CHANGING CAUSES BETWEEN THE EXCHANGE RATE AND THE PRICES OF FOOD AND NON-ALCOHOLIC BEVERAGES

Abstract

The inflationary effect of changes in the exchange rate on domestic prices is called the exchange rate pass-through effect. The macroeconomic consequences of this effect are of great importance for policy makers. Therefore, the aim of the study is to examine the nonlinear dynamics between exchange rates and food and non-alcoholic beverage prices. Time-varying Granger Causality tests based on the LA-VAR model and Recursive Rolling approach were used in order to analyze the variables. The food and non-alcoholic beverage price index has created manually and the exchange rate data has been covered in January 2005 and October 2021 years. The results show that the causality relationship became chronic in and after 2016 when there were exchange rate fluctuations, and there was no causal relationship between the two variables before 2010 when there was exchange rate stability.