Do Wages Chase Prices or Prices Chase Wages? Revisiting the Wage–Price Spiral in Türkiye with QARDL Approach

This study examines the validity of the wage-price spiral in the Turkish economy using quarterly data from 1988: Q1 to 2025: Q1 within a Quantile Autoregressive Distributed Lag (QARDL) framework, complemented by the Fourier Toda-Yamamoto (F-TY) causality test.The analysis incorporates oil prices, the exchange rate, unemployment, and real GDP as control variables to capture broader macroeconomic dynamics.The results show that wage increases exert a consistent upward pressure on inflation across the entire distribution, although the magnitude of this effect varies depending on the prevailing inflation regime.At the same time, inflation pass-through to wages is observed across all quantiles, with the effect particularly strong in the upper quantiles, reflecting stronger bargaining power and indexation mechanisms.The F-TY causality test further confirms statistically significant bidirectional causality between wages and inflation, providing robust evidence of a wage-price spiral in Türkiye.These findings highlight the risk that persistent inflation can fuel a self-reinforcing cycle of rising wages and prices, underscoring the need for credible disinflation strategies and coordinated policy measures to safeguard macroeconomic stability.