In this study has been analyzed the impact of the exchange rate on the PPI and CPI in Turkish economy. The pass through effect is the reflection of the changes in the value of the exchange rate on domestic prices through imports. In the study, the period in which the appreciation of the exchange rate and volatility significantly increased era (2008: 1-2018: 12) was analyzed with the vector auto regression method. The main empirical finding from the study is that the effect of the pass through on producer and consumer prices differs in the short and long run. The pass through effect has been more observed in PPI in the short term. On the other hand, it has been more effective on CPI in the long term. The excessive depreciation of the Turkish Lira caused domestic goods to become relatively cheap compared to foreign markets. In this case, inflationary pressure has increased with foreign demand in addition to domestic demand. The excessive depreciation of the Turkish Lira caused imports expensive and its the imported production factors to be substituted domestically, reducing the demand for imports. As a result of this process, the pass through effect remained limited in producer prices. An excessive economic growth above potential in emerging economies that which provides the current account deficit like Turkish economy, the exchange rate becomes a determining factor in growth and external balance. The increase in the pass through effect interrupted the increase in production, which is the basic dynamic of the exportled growth strategy. On the other hand, with globalization, the integration between economies has accelerated and the value attributed to national income has started to be evaluated via purchasing power parity. As a result, real income from exports decreased in terms of purchasing power parity, although exports increased on a quantitative basis.
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