Inflation, Inflation Uncertainty, and Relative Price Variability
AbstractThis paper tests three models that predict a relationship between the variability of relative price changes (RPV) and aspects of inflation such as expected inflation, unexpected inflation, and inflation uncertainty. These are, respectively, the menu-costs model, the Lucas–Barro signal-extraction model, and the Hercowitz–Cukierman extension of the Lucas–Barro model that allows for different price elasticities of supply across markets. The results imply rejection of the hypothesis that any one of the models entirely explains the relationship between inflation and RPV and also imply rejection of the hypothesis that the three models together jointly explain the relationship.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 66 (1999)
Issue (Month): 2 (October)
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- Carlos Usabiaga. & MarÃa Ãngeles Caraballo & Carlos DabÃºs, 2004.
"Relative Prices and Inflation: New Evidence from Different Inflationary Contexts,"
Econometric Society 2004 Latin American Meetings
338, Econometric Society.
- 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.
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- 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.
- 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.
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