LONG-RUN EXCHANGE RATE PASS-THROUGH EFFECTS AND FOOD PRICES IN TÜRKİYE

This study explores the impact of exchange rate changes on Turkish food prices and their sub-categories using a monthly dataset from 2005:M1 to 2026:M1. Empirical evidence from the Vector Error Correction model indicates that a 1% depreciation of the Turkish Lira translates into a 1.15% increase in general food prices over the long run. Consequently, the estimated pass-through elasticity on food prices exceeds the threshold of “complete pass-through”. This result can be attributed to: i) the price increase stemming from the rise in import prices; ii) the deterioration of inflation expectations and fears of economic agents regarding replacement costs; iii) menu costs; and iv) opportunistic price-setting behaviors. A decomposition into food sub-categories reveals that all food items exhibit a high degree of sensitivity to exchange rates, irrespective of their level of import dependency. We also conducted robustness tests, confirming that our findings remain consistent and show no substantial deviations.