Long-term interactions among food prices, exchange rate and household real income in Türkiye

Food inflation can be expressed as an increase in the general level of food prices in a certain period. The rate of food inflation in the total inflation in Türkiye can be expressed as 25%. While food price increases directly affect inflation, they also exert great pressure on low-income households. In particular, the COVID-19 process and panic-induced demand shocks after the Russia– Ukraine war, sudden changes in monetary policies, and disruptions in the supply chain were directly reflected in food prices. Considering that exchange rate increases and inflation increases occur all over the world, examining the current situation quantitatively is considered important in terms of food inflation and access to food. In this study, the interactions between the real disposable income of households, food inflation, and the dollar exchange rate in Türkiye between 2006 and 2022 were examined. According to the results obtained with the help of time series analysis, the increase in food inflation had a negative effect on disposable real income, whereas the dollar exchange rate had a positive effect. In the fight against food inflation, increasing the supply through productivity increases in agricultural production, adopting subsidies that will minimize costs in agriculture and agriculture-related sectors as state policy, ensuring the sustainability of all departments connected to the food supply chain, and introducing new approaches in inflation fight strategies according to income groups are medium and long term solutions. This will contribute to the economic welfare of households and to the economic growth process based on effective demand.