Abstract
In this paper, we use a novel data set containing prices from bazaars, convenience
stores, and supermarkets in Istanbul to re-examine the relationship between price
dispersion and inflation. Although existing evidence is mixed, we find positive and
significant relationships between dispersion, on the one hand, and lagged dispersion
and unexpected product-specific inflation on the other. We also find evidence that
dispersion is initially decreasing in anticipated aggregate inflation but is eventually
increasing. Finally, average price duration and dispersion are lowest in the bazaar.
This is intuitive, since menu and search costs should be minimal in that market structure.
stores, and supermarkets in Istanbul to re-examine the relationship between price
dispersion and inflation. Although existing evidence is mixed, we find positive and
significant relationships between dispersion, on the one hand, and lagged dispersion
and unexpected product-specific inflation on the other. We also find evidence that
dispersion is initially decreasing in anticipated aggregate inflation but is eventually
increasing. Finally, average price duration and dispersion are lowest in the bazaar.
This is intuitive, since menu and search costs should be minimal in that market structure.
| Original language | English |
|---|---|
| Pages (from-to) | 1187-1208 |
| Journal | European Economic Review |
| Volume | 52 |
| Issue number | 7 |
| DOIs | |
| Publication status | Published - 1 Oct 2008 |