Inflation, price dispersion, and market structure

Mustafa Caglayan, Alpay Filiztekin, Michael T. Rauh

    Research output: Contribution to journalArticle

    21 Citations (Scopus)

    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.
    Original languageEnglish
    Pages (from-to)1187-1208
    JournalEuropean Economic Review
    Volume52
    Issue number7
    DOIs
    Publication statusPublished - 1 Oct 2008

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