Vol. 14 No. 3 (2026): Business & Management Studies: An International Journal
Articles

Inflation dynamics in Türkiye: ENSO regimes, political cycles, and a state-dependent Phillips curve analysis

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  • Parla Onuk
Parla Onuk
Assist. Prof. Dr., Istanbul Nişantaşı University, Istanbul, Türkiye

Published 2026-09-25

Keywords

  • Inflation Dynamics, Phillips Curve, Local Projections
  • Enflasyon Dinamikleri, Phillips Eğrisi, Yerel Projeksiyon Yöntemi

How to Cite

Inflation dynamics in Türkiye: ENSO regimes, political cycles, and a state-dependent Phillips curve analysis. (2026). Business & Management Studies: An International Journal, 14(3), 1518-1545. https://doi.org/10.15295/bmij.v14i3.2786

Copyright (c) 2026 Parla Onuk

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to Cite

Inflation dynamics in Türkiye: ENSO regimes, political cycles, and a state-dependent Phillips curve analysis. (2026). Business & Management Studies: An International Journal, 14(3), 1518-1545. https://doi.org/10.15295/bmij.v14i3.2786

Abstract

This paper examines inflation dynamics in Türkiye within a state-dependent Phillips curve framework by jointly considering domestic and external factors. Using monthly data for the period 2005–2025, conditional relationships across different forecast horizons are estimated through the local projections (LPs) method. The findings indicate that the relationship between the unemployment gap and forward inflation changes varies across ENSO regimes, forecast horizons, and subperiods. Under neutral ENSO conditions, the direct coefficient of the unemployment gap is statistically insignificant over the short and medium term, whereas under El Niño conditions the relationship becomes markedly more negative, particularly at short horizons. However, the structural break analysis shows that this short-run El Niño relationship is not stable throughout the sample period and that the negative differential becomes especially pronounced after August 2021. The El Niño finding weakens at longer horizons and becomes more sensitive to the dynamic specification. Under La Niña conditions, the total marginal effect of the unemployment gap becomes positive at the 18- and 24-month horizons; however, the absence of statistically significant direct differences between the El Niño and La Niña slopes over the short and medium term limits any general interpretation of ENSO asymmetry. The extended model results further show that the positive relationship between exchange rate movements and forward inflation changes is concentrated at shorter horizons, while global supply chain pressures become more pronounced over the medium and long term. The coefficient on the Federal Funds Rate is positive and only marginally significant at the 12-month horizon, whereas the relationship between real economic activity and inflation varies across forecast horizons. The pre-election and pre-referendum dummy is negative and statistically significant only at longer horizons, while the interaction between the unemployment gap and political-event periods is insignificant in the baseline specification. Accordingly, the results provide no strong evidence that political cycles systematically alter the slope of the Phillips curve or generate delayed inflationary pressures. Overall, the findings suggest that inflation dynamics in Türkiye should be evaluated by accounting for the time-, regime-, and horizon-dependent nature of the relationships among ENSO conditions, exchange rate movements, global supply conditions, and domestic economic developments.

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