Is Inflation Rate of Turkey Stationary? Evidence from Unit Root Tests with and without Structural Breaks


Review of Economic and Business Studies, vol.10, no.2, pp.29-52, 2017 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 10 Issue: 2
  • Publication Date: 2017
  • Journal Name: Review of Economic and Business Studies
  • Journal Indexes: EconLit
  • Page Numbers: pp.29-52
  • Recep Tayyip Erdoğan University Affiliated: Yes


Turkey has high inflation experience and in order to bring inflation rate down as well as maintaining macroeconomic stability many policy changes and reforms have been implemented. Despite some success, decreasing inflation rate is still an aim of monetary policy and price stability is still faraway. This article investigates time series properties of Turkish CPI inflation rate in both seasonally unadjusted and adjusted forms. Results of various unit root tests without structural breaks generally show that inflation rate is a nonstationary variable. This article also uses one and two breaks minimum LM unit root tests due to Lee and Strazicich (2004, 2003), respectively. In this case, test results show that inflation rate is a stationary variable with breaks. Although selected break points differ with respect to models and variables to some extent, it is observed that one break occurred around March 1994, and the second break occurred around April 2001.