Inflation and relative price variability: a revisit
AbstractBomberger and Makinen reported in 1993 that the significant positive relationship between relative price variability and the rate of inflation, documented by Parks in 1978 and by others, disappears when the oil-shock years 1974 and 1980 are excluded from the sample. Using a sample of yearly and monthly observations of both a 12- category group and a 202-category group of personal consumption expenditures, evidence is found that Bomberger and Makinen's finding is sensitive to the level of commodity aggregation and to sampling intervals. Specifically, Parks' results are reinstated when the supply shock years of 1974, 1980 and 1990 are eliminated from the annual and monthly samples. Allowing for asymmetrical responses of relative price variability to positive and negative inflation further strengthens the relation between relative price and inflation. The overall evidence renders strong support for the classic findings by Parks and is consistent with the hypothesis of downward price rigidity of some sectors in the economy.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 9 (2002)
Issue (Month): 5 ()
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- Dieter Nautz & Juliane Scharff, 2012.
"Inflation and relative price variability in the euro area: evidence from a panel threshold model,"
Taylor & Francis Journals, vol. 44(4), pages 449-460, February.
- Scharff, Juliane & Nautz, Dieter, 2006. "Inflation and relative price variability in the euro area: evidence from a panel threshold model," Discussion Paper Series 1: Economic Studies 2006,14, Deutsche Bundesbank, Research Centre.
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