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On the Granger causality between median inflation and price dispersion

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  • Richard Ashley
  • Haichun Ye

Abstract

The Granger-causal relationship between the size and dispersion of fluctuations in sub-components of the US Consumer Price Index (CPI) is examined using both in-sample and out-of-sample tests and data from January 1968 to December 2008. Strong in-sample evidence is found for feedback between median inflation and price dispersion; the evidence for Granger-causation from median inflation to price dispersion remains strong in out-of-sample testing, but is less strong for Granger-causation in the opposite direction. The implications of these results for the variety of price-level determination models in the literature are discussed.

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File URL: http://hdl.handle.net/10.1080/00036846.2011.587788
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 44 (2012)
Issue (Month): 32 (November)
Pages: 4221-4238

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Handle: RePEc:taf:applec:44:y:2012:i:32:p:4221-4238

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Cited by:
  1. Richard A. Ashley & Kwok Ping Tsang, 2014. "Credible Granger-Causality Inference with Modest Sample Lengths: A Cross-Sample Validation Approach," Econometrics, MDPI, Open Access Journal, vol. 2(1), pages 72-91, March.

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