Explain the mechanism of exchange rate pass through effect on inflation (with direct and indirect channels) and associate this concept with the Open Economy Phillips Equation. CBRT has thought that exchange rate pass through effect on inflation is very significant for Turkish economy. Also, TL has depreciated since the beginning of 2014 (After Bernanke announced that the Fed would soon begin to taper its bond purchases, it was accepted as a signal about the end of the QE policy). Even if Turkey had been able to keep its unemployment rate close to its natural level, what would you expect to see in inflation rates?