Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
965230 | Journal of Macroeconomics | 2016 | 20 Pages |
Abstract
This paper investigates the relationship between relative price variability (RPV) and inflation using monthly micro-price data for 128 goods in 13 Turkish regions/cities for the period 1994-2010. The unique feature of this data set is the inclusion of annual inflation rates ranging between 0% and 90%. Semi-parametric estimations show that there is a hump-shaped relationship between RPV and inflation, where the maximum RPV is achieved when annual inflation is approximately 20%. It is shown that this result is consistent with a region- or city-level homogenous menu cost model that features Calvo pricing with an endogenous contract structure and non-zero steady-state inflation.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Deniz Baglan, M. Ege Yazgan, Hakan Yilmazkuday,