High versus Low Inflation: Implications for Price-Level Convergence
32 Pages Posted: 26 May 2010 Last revised: 22 Nov 2016
Date Written: May 4, 2015
Abstract
This paper investigates the relationship between the level of inflation and regional price-level convergence utilizing micro-level price data from Turkey during two clearly distinguishable periods of high and low inflation. The results indicate that higher persistence and slower convergence of price levels are evident during the low-inflation period, which corresponds to the inflation-targeting (IT) regime that was successful in lowering and maintaining inflation at acceptable levels. During this low-inflation IT regime, it is also shown that inflation convergence across regions appears to occur more quickly and may be responsible for the slower pace of convergence in price levels.
Keywords: Price Convergence, Inflation Convergence, Micro-level Prices, Turkey
JEL Classification: E31, F41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Charles M. Engel and John H. Rogers
-
Perspectives on PPP and Long-Run Real Exchange Rates
By Kenneth Froot and Kenneth Rogoff
-
A Panel Project on Purchasing Power Parity: Mean Reversion within and between Countries
-
Purchasing Power Parity in the Long Run
By Niso Abuaf and Philippe Jorion
-
Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations
By David C. Parsley and Shang-jin Wei
-
Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography
By David C. Parsley and Shang-jin Wei