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High versus Low Inflation: Implications for Price-Level Convergence

Listed author(s):
  • M. Ege Yazgan

    ()

    (Department of Economics, Kadir Has University)

  • Hakan Yilmazkuday

    ()

    (Department of Economics, Florida International University)

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.

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File URL: http://economics.fiu.edu/research/working-papers/2015/1503/1503.pdf
File Function: First version, 2015
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1503.

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Length: 32 pages
Date of creation: May 2015
Handle: RePEc:fiu:wpaper:1503
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Web page: http://economics.fiu.edu

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