Policy Requirements under Different Macroeconomic Conditions: An Application of Micro CPI Data

The purpose of the paper is to answer several questions. First, if inflation, business cycles, and exchange rate changes are viewed as representative of the state of the economy, is there any evidence of the difference in the type of reaction of the economic sector to monetary and fiscal policies in different macroeconomic conditions? Second, if there is a difference in the type of economic reaction to monetary and fiscal policies, this difference stems from the macroeconomic environment or rooted in the severity of the shocks experienced in the economy in different periods. And third, if the observed difference is due to the macroeconomic environment, which macroeconomic variables play a more important role in creating this difference? Using monthly data of 308 items of consumer price index from 1383: 1 to 1397: 8, it follows that the price-setting behavior indicators in different macroeconomic conditions take different values and these differences are due to the macroeconomic environment. And it's not related to the severity of shocks at different times. Also, in creating these differences, the exchange rate plays a more important role than other macroeconomic variables.