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Relative Price Variability and Inflation in Europe

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  • Fielding, David
  • Mizen, Paul

Abstract

The relationship between inflation and the relative variability of prices has been the subject of careful investigation in the United States using data for product groups at the city level. Yet in Europe, where the relationship could have profound effects on the viability of monetary integration, no attempt has been made to study the relationship. This paper fills the gap by examining data disaggregated to the commodity level across 10 EU countries. Evidence is found for logistic smooth transitions in the relative price variability measures within countries and within product groups. When this deterministic component is removed, the stochastic element is not persistent and does not always have the positive relationship with inflation commonly found in US city data. Copyright 2000 by The London School of Economics and Political Science

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 67 (2000)
Issue (Month): 265 (February)
Pages: 57-78

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Handle: RePEc:bla:econom:v:67:y:2000:i:265:p:57-78

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Cited by:
  1. Sven Schreiber & Juliane Scharff, 2008. "Evidence on the effects of inflation on price dispersion under indexation," IMK Working Paper 12-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Abdul Karim, Zulkefly & Zaidi, Mohd Azlan Shah & Jusoh, Mansor, 2008. "Variabiliti harga relatif dan inflasi : bukti empirikal di Semenanjung Malaysia, Sabah dan Sarawak
    [Relative price variability and inflation: empirical evidence in Peninsular Malaysia, Sabah and Sa
    ," MPRA Paper 26970, University Library of Munich, Germany, revised Jun 2008.
  3. Muhammad Akmal, 2012. "The Relationship between Inflation and Relative Price Variability in Pakistan," Working Papers id:4734, eSocialSciences.
  4. Becker, Sascha S. & Nautz, Dieter, 2012. "Inflation, price dispersion and market integration through the lens of a monetary search model," European Economic Review, Elsevier, vol. 56(3), pages 624-634.
  5. R. A. Somerville, 2004. "Changes in Relative Consumer Prices and the Substitution Bias of the Laspeyres Price Index - Ireland, 1985-2001," The Economic and Social Review, Economic and Social Studies, vol. 35(1), pages 55-82.
  6. M. Angeles Caraballo & Carlos Dabus & Carlos Usabiaga, 2006. "Relative prices and inflation: new evidence from different inflationary contexts," Applied Economics, Taylor & Francis Journals, vol. 38(16), pages 1931-1944.
  7. Bakhshi, Hasan, 2002. "Inflation and relative price variability," Economics Letters, Elsevier, vol. 76(1), pages 27-33, June.
  8. Alexander Bick & Dieter Nautz, 2008. "Inflation Thresholds and Relative Price Variability: Evidence from U.S. Cities," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 61-76, September.
  9. Ozlem Onaran & Nurhan Yenturk, 2001. "Do Low Wages Stimulate Investment? An analysis of the relationship between distribution and investment in Turkish private manufacturing industry," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(4), pages 359-374.
  10. Dieter Nautz & Juliane Scharff, 2012. "Inflation and relative price variability in the euro area: evidence from a panel threshold model," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 449-460, February.
  11. Dieter Nautz & Juliane Scharff, 2005. "Inflation and Relative Price Variability in a Low Inflation Country: Empirical Evidence for Germany," German Economic Review, Verein für Socialpolitik, vol. 6(4), pages 507-523, November.
  12. Baek, Jungho, 2010. "Inflation and Intramarket Price Variability: Empirical Evidence from U.S. Food Products," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 33(4), October.
  13. David Parsley Helen Popper, 2002. "Inflation And Price Dispersion In Equity Markets And In Goods And Services Markets," Macroeconomics 0211004, EconWPA.
  14. Sascha S. Becker, 2011. "What Drives the Relationship Between Inflation and Price Dispersion? Market Power vs. Price Rigidity," SFB 649 Discussion Papers SFB649DP2011-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  15. Mª Ángeles Caraballo Pou & Carlos Dabús & Diego Caramuta, 2006. "A Non-linear "Inflation-Relative Prices Variability" Relationship: Evidence from Latin America," Economic Working Papers at Centro de Estudios Andaluces E2006/09, Centro de Estudios Andaluces.
  16. Andersen, Torben M., 2002. "Nominal rigidities and the optimal rate of inflation," European Journal of Political Economy, Elsevier, vol. 18(2), pages 375-389, June.
  17. María Ángeles Caraballo & Carlos Dabús., 2008. "The Determinants of Relative Price Variability: Further Evidence from Argentina," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 45(132), pages 235-255.

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