Relative Price Variability and Inflation: New evidence

Deniz Baglan (), Ege Yazgan () and Hakan Yilmazkuday
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Deniz Baglan: Department of Economics, Howard University

No 1502, Working Papers from Florida International University, Department of Economics

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%. Nonparametric 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 featuring Calvo pricing with an endogenous contract structure and non-zero steady-state inflation.

Keywords: Relative price variability; Calvo pricing; Menu costs (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015-03
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://economics.fiu.edu/research/pdfs/2015_working_papers/1502.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Relative price variability and inflation: New evidence (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fiu:wpaper:1502

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