Inflation, defined as the continuous increase in the general price level, is one of the key elements that threatens economic stability, and thus plays a critical role in the formulation of economic policies. Inflation is classified according to its causes, and this classification is of great importance for the design of effective policies to combat inflation. In this study, the determinants of inflation in Turkey are investigated using quarterly data from Q1 2006 to Q2 2018 through the ARDL Bounds Test. Using data obtained from the Central Bank of the Republic of Turkey, the ARDL model and the Toda-Yamamoto (1995) Granger causality test are employed to identify the relationships between the variables. In the model, inflation (LINF) is considered as the dependent variable, while interest rates (LIR), exports (LEXP), gold prices (LGLD), and the exchange rate (LUSD) are treated as independent variables. Unit root tests indicate that all variables, except for LEXP, are I(1), while LEXP is I(0). The Toda-Yamamoto causality test reveals a strong bidirectional causality between inflation and the exchange rate, a significant effect of inflation on gold prices, but no statistically significant effect of gold prices on inflation. No significant causality is found between interest rates, exports, and inflation.

The ARDL long-run coefficients show that interest rates have a negative and limited effect on inflation, gold prices decrease inflation, and exchange rates increase inflation. In the short-run analysis, the error correction term is found to be significant, indicating that the model is working towards its long-run equilibrium. While exchange rate changes strongly affect inflation in the short term, the short-term effect of interest rate changes is statistically insignificant. The study concludes that the exchange rate has the strongest effect on inflation, gold prices have a deflationary effect, and the impacts of interest rates and exports on inflation are limited or insignificant.