THE ROLE OF U.S. LONG-TERM GOVERNMENT BOND YIELDS, BITCOIN AND GOLD PRICES IN EXPLAINING CHANGES IN TURKEY'S CPI

Abstract

Purpose- The main objective of this study is to investigate comparative short- and long-term impacts of U.S. long-term government bond yields, gold, and Bitcoin prices on the shift in Turkey's consumer price index (CPI) between January 2021 and March 2025. No prior studies were found for the comparative impact of the given variables. Digital assets such as Bitcoin became increasingly important for the global economy after the 2020 pandemic period. Many people bought digital assets to protect themselves from rising inflation. The inclusion of the Bitcoin variable and its effect on inflation in Turkey is another important objective of this research. Methodology- A two-regime Markov regime-switching model and cointegration analysis using FMOLS and DOLS techniques were employed to examine these relationships. Findings- The results indicate that U.S. long-term government bond yields significantly and positively influence Turkey's CPI under both regimes. Gold prices have a significant positive influence on changes in the CPI during regime 2 periods, but Bitcoin prices exhibit a significant negative relationship with Turkey’s CPI for the same regime. The FMOLS and DOLS analyses reveal that only U.S. long-term government bond yields have a significant, long-term positive influence on Turkey's CPI. Conclusion- According to this study, both in the short and long term, U.S. long-term government bond yields have a significant and steady positive influence on Turkey's CPI. During regime 2 periods, gold prices have a major positive influence on Turkey's CPI, whereas Bitcoin has a major negative effect on shifts in Turkey’s CPI. According to the findings, Bitcoin might be able to provide short-term inflation protection in Turkey, but only during specific economic regimes. Gold was found to have a positive significant influence on Turkey’s CPI for the short term. Moreover, it was found that gold and Bitcoin are not suitable for long-term safe haven asset classes for Turkey. Overall, the results show that U.S. long-term government bond yields had the most significant influence on Turkey's inflation dynamics over the analysis period. The findings highlight that Turkey’s inflation rate is highly sensitive to major international interest rate movements.