The Relationship Between Financial Structure and Inflation: Evidence from Türkiye

The aim of this study is to examine the relationship between the Consumer Price Index (CPI) and the Producer Price Index (PPI) and the financial structure ratios of firms in Türkiye that keep their books on a balance-sheet basis. CPI and PPI were considered as key indicators of inflation. The financial structure ratios analyzed in the study include: Total Liabilities/Total Assets (TL/TA), Equity/Total Assets (EQ/TA), Equity/Total Liabilities (EQ/TL), Short-Term Liabilities/Total Equity and Liabilities (STL/TEL), Long-Term Liabilities/Total Equity and Liabilities (LTL/TEL), Net Tangible Fixed Assets/Long-Term Liabilities (TFA/LTL), Fixed Assets/Total Liabilities (FA/TL), Fixed Assets/Equity (FA/EQ), Current Assets/Total Assets (CA/TA), and Net Tangible Fixed Assets/Total Assets (TFA/TA). In the study, panel regression method was employed in order to analyze the relationship between financial structure ratios and inflation rates. The findings reveal a statistically significant and positive relationship between CPI and PPI and the TL/TA, STL/TEL, LTL/TEL, and CA/TA ratios. Conversely, a statistically significant and negative relationship was identified between CPI and PPI and the EQ/TA, EQ/TL, TFA/LTL, FA/TL, FA/EQ, and TFA/TA ratios.