Determination of the causal relationship between beef prices and the consumer price index in Turkey

Abstract

The rising prices of beef meat have recently restricted its accessibility for consumers who need to consume it for a balancedand healthy diet. Speculations have been made about the increase in beef meat prices being one of the major factors underlying theincrease in the consumer price index (CPI). In this scope, the causal relationship between the monthly average prices of beef and therate of year-on-year change in the CPI for the period between January 2005 and February 2018 was analyzed in the study. Since timeseries data were used, the augmented Dickey–Fuller and Phillips–Perron tests were conducted to find out whether the series werestationary. Nonstationary series were made stationary by taking their difference. After conducting unit root test on the series, a vectorauto regression model was developed, and the causality between the variables was tested by the Granger Causality Analysis. The resultsof the Granger Causality Analysis indicate that the monthly average price of beef and the rate of year-on-year change in the CPI arecausally related at a level of 5% and 10%. In conclusion, the monthly data of the CPI and the beef prices between January 2005 andFebruary 2018 are causally related at a significance level of 1%.