Global Economic and Political Uncertainty and Inflation Dynamics: A Structural Break and Causality-Based Analysis for Türkiye
Chapter from the book: Bal, H. & Ata, A. Y. (eds.) 2025. Macroeconomic Policies and Practices in Light of New Transformations in the Economy.

Süleyman Gürbüz
Yozgat Bozok University

Synopsis

This study investigates the impact of Global Economic Policy Uncertainty (GEPU) on inflation in Türkiye by incorporating interest rates and exchange rates within a unified empirical framework. Using monthly data for the period 2005:01–2025:10, the analysis employs the Zivot–Andrews unit root test, the Gregory–Hansen cointegration approach with structural breaks, and the Toda–Yamamoto causality test. The results reveal the existence of a long-run cointegration relationship among GEPU, inflation, interest rates, and exchange rates under structural breaks. Causality findings indicate a strong unidirectional effect from GEPU to inflation, as well as a dominant role of the exchange rate channel in shaping inflation dynamics. Moreover, GEPU appears to be largely exogenous to domestic macroeconomic variables, suggesting that global uncertainty shocks transmit to Türkiye mainly through external and financial channels. Overall, the findings highlight that economic policy uncertainty constitutes a significant determinant of inflation dynamics in Türkiye, underscoring the importance of policy credibility, exchange rate stability, and effective communication strategies during periods of heightened global uncertainty.

How to cite this book

Gürbüz, S. (2025). Global Economic and Political Uncertainty and Inflation Dynamics: A Structural Break and Causality-Based Analysis for Türkiye. In: Bal, H. & Ata, A. Y. (eds.), Macroeconomic Policies and Practices in Light of New Transformations in the Economy. Özgür Publications. DOI: https://doi.org/10.58830/ozgur.pub1115.c4509

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Published

December 30, 2025

DOI