The Relationship Between Industrial Production Index, Oil Prices and Consumer Price Index in the Turkish Economy

Abstract

Countries trying to increase their production in the industrial sector wish to have access to cheap energy. However, a rise in oil prices affects the industrial production of countries dependent on oil. Furthermore, as production costs increase, the general level of prices also increases. This study aims to examine the long-term effects of the rise in oil prices on the industrial production index and the CPI in the Turkish economy. Since the study measures the impact of Brent crude oil prices on the industrial production index and CPI for the Turkish economy, it contributes to the literature. In this respect, the study investigated the relationships among the specified variables for the 2010: Q1-2020: Q4 period of the Turkish economy. Phillips-Ouliaris cointegration test and Granger and Bootstrap causality test were used to analyze the relationship among the variables. A long-term relationship was found between the variables. According to the results of both causality tests, it was determined that the rise in oil prices raised the CPI by increasing the cost of industrial production in the Turkish economy. The findings show that oil prices should be monitored closely by actors of economic management.