Is the Food Price Volatility Responsible for Inflation Volatility? An Investigation for Turkey

The purpose of this study is to investigate the impact of food price and its volatility in the overall level and volatility of inflation measured by the consumer price index (CPI). Appropriate GARCH models are estimated for the food and headline inflation in Turkey as tests confirms the presence of volatility for both. Starting with a hybrid new Keynesian type of Phillips Curve, analyses based on ARDL bounds tests, VAR models and ANN all indicate that food-inflation and the change in exchange rate proxied by the US dollar have significant and lasting impact on the level and the volatility of inflation in Turkey. Hence, a policy focus on core inflation should account the food inflation