News impact for Turkish food prices

Abstract

Asymmetric volatility is a widely encountered concept particularly inŞnancial series. It refers to thecase that“bad news” generates more volatility than “good news” of equal magnitude. In an inflationary environment“bad news” is disclosed as increasing inflation that is expected to generate highervolatility. The present article examines whether unexpected price changes affect the volatility ofprices asymmetrically for 90 retail food items of the Turkish consumer price index. These 90 fooditems have a weight of approximately 20 percent in headline consumer price index (CPI). We employexponential generalized autoregressive conditional heteroscedastic (EGARCH) model to extractasymmetric volatility, using monthly data between January 2003 and January 2017. Our results revealthat volatility of food prices respond asymmetrically to unexpected price shocks for 62 percent of theretail food items.© 2017 Central Bank of The Republic of Turkey. Production and hosting by Elsevier B.V. This is an openaccess article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)