Relative Price Dispersion, Aggregate Price Movement, and the Natural Rate of Unemployment
AbstractThis paper develops a model of relative price stickiness and examines its implications for the relationship between relative prices, inflation, and the natu ral rate of unemployment. Estimation of the model demonstrates that c ausality in the relationship between relative and aggregate prices ru ns in both directions. However, microeconomic disturbances have been the primary source of relative price change variance over the postwar period, and these micro disturbances have exerted a strong effect on inflation in the short run. It also is shown that micro relative pri ce change dispersion has had a significant influence on the natural r ate of unemployment. Copyright 1988 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 26 (1988)
Issue (Month): 1 (January)
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- Jessie Handbury & Tsutomu Watanabe & David E. Weinstein, 2013.
"How Much Do Official Price Indexes Tell Us about Inflation?,"
NBER Working Papers
19504, National Bureau of Economic Research, Inc.
- Tsutomu Watanabe & David Weinstein & Jessie Handbury, 2014. "How Much Do Official Price Indexes Tell Us About Inflation?," 2014 Meeting Papers 73, Society for Economic Dynamics.
- Jessie Handbury & Tsutomu Watanabe & David E. Weinstein, 2013. "How Much Do Official Price Indexes Tell Us About Inflation?," CARF F-Series CARF-F-328, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- Hajime Tomura, 2013. "Investment Horizon and Repo in the Over-the-Counter Market," UTokyo Price Project Working Paper Series 013, University of Tokyo, Graduate School of Economics.
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