Turkish inflation drives consumers to incur extreme shoe-leather costs

Inflation imposes costs on people. One of the costs of inflation is that it gives people strong incentives to spend time and effort avoiding higher prices. They can do that by reducing their cash holdings, searching harder for low prices, or, in extreme cases, travelling to shop elsewhere. When inflation is high, and prices are increasing rapidly, consumers have a strong incentive to spend a lot of time doing these things. Economists call these shoe-leather costs, because when consumers have to walk around a lot of stores in order to compare prices, their shoes wear out. At least, that's a literal explanation of the term. In an age where prices are published online, the actual act of 'walking around to compare prices' is a lot easier on the shoes. Or is it? An extreme example has been playing out recently, as reported in Bloomberg last November (paywalled, but you can find an ungated version here):

Almost every month, Cihan Citak gets into his car, passport in hand, and sets off from Istanbul to Alexandroupolis, a Greek seaside city 40 kilometers (25 miles) from the Turkish border. After a roughly four-hour drive, he walks the crowded aisles of the local supermarket, filling his cart with wine, cheese and other groceries that cost a fraction of what they do back home...

Cross-border retail has become routine for many who found that Turkey’s surging food prices and stronger lira make Greece a cheaper alternative for everyday purchases. The trend, while not new, is accelerating: 6% of all Turks crossing the border to Greece in the first nine months of the year were on a shopping run, the highest share of overall travelers since at least 2012, data from the country’s statistics agency show.

When inflation causes people to drive four hours in order to find lower prices, you know the shoe-leather costs must be high. The inflation rate in Türkiye is over 30 percent. That isn't hyper-inflation, but it is very high. For comparison in New Zealand, the inflation rate spiked at about 7 percent just after the pandemic, but that was the highest it had been in over 30 years. Inflation more recently has been between 2.5 and 3.5 percent, which is higher than the Reserve Bank's mandate to keep inflation between one and three percent in the medium to long term.

All of that is to say that Türkiye’s much higher inflation creates much stronger incentives for consumers to incur shoe-leather costs to avoid higher prices than is currently the case in New Zealand

[HT: New Zealand Herald, also paywalled]