An investigation of the wage-price spiral mechanism in the Turkish manufacturing sector: Evidence from Bayer-Hanck cointegration

This study empirically investigates whether a wage-price spiral exists in the Turkish manufacturing sector over the period from the first quarter of 2009 to the fourth quarter of 2019. The analysis examines cointegration and causal relationships between wages and prices across five manufacturing subsectors-intermediate goods, energy goods, capital goods, durable consumer goods, and non-durable consumer goods-using data from TurkStat. The Bayer-Hanck cointegration test indicates a statistically significant long-run relationship between wages and prices at the 1% level in all subsectors when wages are specified as the dependent variable, except for the durable consumer goods subsector, where the relationship is significant at the 10% level. When prices are specified as the dependent variable, the long-run relationship is significant at the 1% level in all subsectors. The Toda-Yamamoto causality test indicates unidirectional causality running from prices to wages, with no evidence of causality from wages to prices. Despite the long-run cointegration, the results provide no evidence of a self-reinforcing wage-price spiral in the Turkish manufacturing sector.