Relative Price Dispersion and the Rate of Inflation: The Evidence from Japan
AbstractThe relationship between inflation and price variability has been of interest to economists for many years. Recently, Ball and Mankiw  have proposed a menu-cost model of price stickiness in which the skewness of relative price infla - tion matters as well as the standard deviation. In this paper their model is test - ed on Japanese wholesale price data. The results are mixed. When we use the single equation approach of Ball and Mankiw the results appear to favour their model. However, once we condition inflation on the growth in the money stock and allow for the simultaneity of inflation and relative price variability predict - ed by a Lucas type misperceptions model, then the effects postulated by Ball and Mankiw largely disappear, while inflation seems to drive both the standard devi - ation and skewness of relative prices.
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Bibliographic InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 12 (1997)
Issue (Month): ()
Relative; Price; Dispersion;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- A. Nazif Catik & Christopher Martin & A. Özlem Önder, 2008.
"Relative Price Variability and the Philips Curve: Evidence from Turkey,"
0807, Ege University, Department of Economics.
- Christopher Martin & A. Nazif Çatik & A. Özlem Onder, 2011. "Relative price variability and the Phillips Curve: evidence from Turkey," Journal of Economic Studies, Emerald Group Publishing, vol. 38(5), pages 546-561, November.
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