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Relative Price Variability and the Philips Curve: Evidence from Turkey

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Author Info

  • A. Nazif Catik

    ()
    (Department of Economics, Ege University)

  • Christopher Martin

    ()
    (Department of Economics and Finance, Brunel University)

  • A. Özlem Önder

    ()
    (Department of Economics, Ege University)

Abstract

We argue that relative price changes are a key component of the Phillips curve relationship between inflation and output. Building on work by Ball and Mankiw, we propose including measures of the variances and skewness of relative price adjustment in an otherwise standard model of the Phillips curve. We examine the case of Turkey, where distribution of price changes is especially skewed and where the existence of a Phillips curve has been questioned. We have two main findings: (i) inclusion of measures of the distribution of relative price changes improves our understanding of the Phillips curve trade-off; (ii) there is no evidence of such a trade-off if these measures are not included.

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File URL: http://iibf.ege.edu.tr/economics/papers/wp08-07.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Ege University, Department of Economics in its series Working Papers with number 0807.

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Length: 26 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:ege:wpaper:0807

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Web page: http://www.iibf.ege.edu.tr/economics/
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Related research

Keywords: Inflation; Philips Curve; Cross-Sectional Moments of Inflation; Relative Price Variability.;

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References

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  1. Jörg Döpke & Christian Pierdzioch, 2001. "Inflation and the Skewness of the Distribution of Relative Price Changes: Empirical Evidence for Germany," Kiel Working Papers 1059, Kiel Institute for the World Economy.
  2. Debelle, Guy & Lamont, Owen, 1997. "Relative Price Variability and Inflation: Evidence from U.S. Cities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(1), pages 132-52, February.
  3. Özlem Önder, 2006. "The Stability Of The Turkish Phillips Curve And Alternative Regime Shifting Models," Working Papers, Ege University, Department of Economics 0602, Ege University, Department of Economics.
  4. A. Özlem Önder, 2004. "Forecasting Inflation in Emerging Markets by Using the Phillips Curve and Alternative Time Series Models," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(2), pages 71-82, March.
  5. Holly, Sean, 1997. "Relative Price Dispersion and the Rate of Inflation: The Evidence from Japan," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 206-226.
  6. Richard De Abreu Lourenco & David Gruen, 1995. "Price Stickiness and Inflation," RBA Research Discussion Papers rdp9502, Reserve Bank of Australia.
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Cited by:
  1. Mubariz Hasanov & Aysen Arac & Funda Telatar, 2012. "Nonlinearity and Structural Stability in the Phillips Curve: Evidence from Turkey," Hacettepe University Department of Economics Working Papers, Hacettepe University, Department of Economics 20123, Hacettepe University, Department of Economics.

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