The Causal Relationship between Inflation and Interest Rates: The Case of Turkey

In this study the casualty relation between the interest rates and inflation has been examined. By using the data series of the inflation and interest rates between the 2003:01-2015:02 periods, it has been tried to be estimated the relation between the series with the Granger casual analysis method. As a result of analysis the series being subtracted from logarithm, have been stabilized by applying the ADF and PP unit root tests after correcting seasonal effects. After the application of Granger casualty analysis the casualty relation between the inflation and interest rates has been tried to be explained by practicing Johansen cointegration analysis. According the result, it is seen that although there is not a casualty relation through the interest rates to inflation, there is a casualty relation from inflation to interest rates.