Wage and Price Inflation: Evidence with Asymmetric Methods for Türkiye

Authors : Serhat Alpağut

Pages : 157-170

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Publication Date : 2025-01-29

Article Type : Research Paper

Abstract :The relationship between wages and inflation has retained its importance since early economists. In particular, during periods of high inflation, arguments that wages are the main source of inflation return to the agenda. In contrast to the linear relationships presented in previous studies, this study addresses the issue with a non-linear econometric approach. The study on Türkiye uses quarterly data for the years 2012-2023 and applies the NARDL analysis. The first result is that there is an asymmetric relationship between wages and inflation. The second result is that a positive shock to wages has a positive impact on inflation. This result is consistent with previous studies. The third result is that a negative shock to wages has a strongly negative effect on inflation. The effect of a negative shock to wages is stronger than that of a positive shock. This result is quite striking. Moreover, the cumulative dynamic multiplier effect analysis shows that in the case of a negative shock to gross wages, the decline in inflation lasts for 3 periods (9 months) and this effect stabilises at the end of 5 periods (15 months).
Keywords : Enflasyon, Ücretler, Nonlinear ARDL