Ramadan Effect on Prices and Production: Case of Turkey

The detection of seasonal effects is essential in economic forecasting. However, the lack of indicators produced referencing calendars other than the Gregorian system makes it hard to observe the impact of the cultural, national, and religious days that annually shift in the Gregorian calendar, on the economy. Ramadan, the ninth month of the lunar-based Hijri calendar, has an impact on many issues, namely the Ramadan effect, due to the changes in the daily practices of the fasting Muslim people. We checked the existence of the Ramadan effect on consumer prices and industrial production in Turkey by reconstructing the monthly indicators in the Hijri calendar and testing the significance of the differences between their increase rates in Ramadan and other months. We observed that the Food Price Index and prices of some goods increase, and production decrease in Ramadan, significantly more than in other months. Considering the Ramadan effect would improve the accuracy of the inflation forecasting and seasonal adjustment models.