The Determinants of Price Frequency in Turkey

Chapter in Academic Research in Social, Human and Administrative Sciences-I, Forthcoming

17 Pages Posted: 10 May 2018

See all articles by Engin Yilmaz

Engin Yilmaz

Turkish Tax Inspection Board

Bora Suslu

Mugla Sitki Kocman University

Date Written: April 20, 2018

Abstract

The effect of monetary and fiscal policy on the output depends on the frequency of price changes. When the prices change infrequently or prices change slowly, monetary and fiscal policy have a real effects on the output. Developed countries generally have a rigid prices but developing countries have a relatively flexible prices. This difference is originated from the reality that the developing countries have higher average inflation than the developed countries. Economic literature focuses on the micro reasons of the frequency of price changes, on the other hand, the inflation is seen the main factor which affects the frequency of price changes in the macro perspective. This study holds down the assumption that the frequency of price changes is a function of the inflation rate in the macro perspective. In addition to this, it is also focused on the direct relationships between the frequency of price changes and the macro variables which affect the inflation rate. It is revealed the effect of macro factors on the frequency of price changes in this work. It is concluded that the determinants of the frequency of price changes in the macro perspective in Turkey are the expected inflation and the exchange rate rather than output gap. It can be said that firms’ price frequency behavior directly depends on cost push factors in Turkey.

Keywords: Price Frequency, Price Rigidity, Determinants of the Price Frequency

JEL Classification: E31, E32

Suggested Citation

Yilmaz, Engin and Suslu, Bora, The Determinants of Price Frequency in Turkey (April 20, 2018). Chapter in Academic Research in Social, Human and Administrative Sciences-I, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3167556 or http://dx.doi.org/10.2139/ssrn.3167556

Engin Yilmaz (Contact Author)

Turkish Tax Inspection Board ( email )

Cukur Ambar Mh
Ankara, Ankara 06100
Turkey
903122535151 (Phone)

Bora Suslu

Mugla Sitki Kocman University ( email )

Kötekli Mh
48200
Turkey

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