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Inflation and real sectoral output shares: Dynamic panel model evidence from seven OECD countries

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  • Davis, George K.
  • Hineline, David
  • Kanago, Bryce E.

Abstract

Models of the cost of inflation often conclude that inflation misallocates resources. For example, inflation may lead to an increase in the variability of relative prices and it is often claimed that this increase in variability leads to a misallocation of resources. This claim raises the following empirical question, does inflation alter the composition of real output; that is, does it change real output shares? We examine this question using dynamic panel data methods for nine sector panels each with seven OECD countries from 1970 to 2005. We find evidence that inflation changes the real shares of some sectors even when inflation is treated as endogenous.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 4 ()
Pages: 607-619

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:4:p:607-619

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Costs of inflation; Relative-price variability; Misallocation of resources; Sectoral output shares;

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References

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  10. Horwitz, Steven, 2003. " The Costs of Inflation Revisited," The Review of Austrian Economics, Springer, vol. 16(1), pages 77-95, March.
  11. Iscan, Talan & Osberg, Lars, 1998. "The Link between Inflation and Output Variability in Canada: Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 261-72, May.
  12. Andrews, Donald W. K. & Lu, Biao, 2001. "Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models," Journal of Econometrics, Elsevier, vol. 101(1), pages 123-164, March.
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Cited by:
  1. Nagayasu, Jun, 2012. "Regional inflation and industrial structure in monetary union," MPRA Paper 37310, University Library of Munich, Germany.

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