IMPACT OF OIL PRICES ON INFLATION IN OIL-IMPORTING COUNTRIES: THE CASE OF TURKEY

Abstract

This study aims at investigating the link between international oil prices and inflation in case of Turkey, a small open industrial economy without oil resources, for the period 1983:01 and 2006:05. Granger causality test is employed in this study to investigate the relationship and causality between the oil prices and inflation for Turkey. The results of Granger-causality test show that the causality is running from oil prices to inflation. Therefore, we conclude that increases in oil prices have had a positive impact on inflation in Turkey over the period between 1983:01 and 2006:05.