Effect of Monetary Indicators on Agricultural Prices: Evidence from Turkiye

Abstract

This study sought to reveal the effects of Turkish Lira and US dollar exchange rate (EXR), money supply (M2) on agricultural commodity producers’ prices. The direction and the size of the relationship among the data was estimated using VECM Vector Error Correction Model (VECM). The results reveal that the causality runs from M2 to agricultural price (AP) in the short run, but not from AP to M2. In the long run the effect of EXR is more than M2. The coefficient of error correction term in the agricultural price equation is 0.0726 and is statistically significant at 1%. Referring to it, all of the system instability can be adjusted approximately in 14 months. This research shows that the exchange rate (EXR) and money supply (M2) have important long-run effects on agricultural prices (AP). In order to control agricultural prices, it is necessary to follow these macro variables closely.