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City price convergence in Turkey with structural breaks

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  • C12 - Hypothesis Testing: General
  • C13 - Estimation: General
  • C22 - Time-Series Models
  • Dynamic Quantile Regressions
  • Dynamic Treatment Effect Models
  • C52 - Model Evaluation
  • Validation
  • And Selection
  • D40 - General
  • E31 - Price Level
  • Inflation
  • Deflation
  • E37 - Forecasting And Simulation: Models And Applications


This paper explores relative price convergence for 18 cities in Turkey. The convergence implies stationarity in the long run. Henceforth, to observe whether price convergence occurs or not, this study conducts unit root tests following Lee and Strazicich (2003) with two structural breaks in level and/or trend. The test statistics reveal that 13 out of 18 consumer price indexes converge. The half-life measurement points out that the speed of convergence of each city is considerably high. This result indicates that the half of the cumulative shocks persists for a short time period.

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