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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)

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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 Format: application/pdf
File Function: First version, 2008
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Publisher 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.

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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This page was last updated on 2008-10-4.

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