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The relevance of supply shocks for inflation: the spanish case

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  • M. Angeles Caraballo
  • Carlos Usabiaga

Abstract

The methodology applied in this article to the Spanish economy is based on Ball and Mankiw (1995). These authors assume that a good proxy for supply shocks is the third moment of the price changes distribution. The main data used are the monthly consumer price indexes of each region, disaggregated in 57 categories, for the 1993-2005 period. We estimate the relation between mean inflation and the higher moments of the distribution, including several control variables. Our results point out that Spanish regions show a common pattern with regard to nominal rigidities, and that Spanish inflation is vulnerable to supply shocks.

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Bibliographic Info

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

Volume (Year): 41 (2009)
Issue (Month): 6 ()
Pages: 753-764

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Handle: RePEc:taf:applec:v:41:y:2009:i:6:p:753-764

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  1. Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
  2. Mª Ángeles Caraballo Pou & Carlos Dabús, 2005. "Nominal rigidities, relative prices and skewness," Economic Working Papers at Centro de Estudios Andaluces E2005/17, Centro de Estudios Andaluces.
  3. Dolado, Juan J. & Jimeno, Juan F., 1997. "The causes of Spanish unemployment: A structural VAR approach," European Economic Review, Elsevier, vol. 41(7), pages 1281-1307, July.
  4. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  5. Luc Aucremanne & Guy Brys & Peter J Rousseeuw & Anja Struyf & Mia Hubert, 2003. "Inflation, relative prices and nominal rigidities," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 81-105 Bank for International Settlements.
  6. Ángel Estrada & J. David López-Salido, 2002. "Understanding Spanish dual inflation," Banco de Espa�a Working Papers 0205, Banco de Espa�a.
  7. Laurence Ball & N. Gregory Mankiw, 1993. "Relative-price changes as aggregate supply shocks," Working Papers 93-13, Federal Reserve Bank of Philadelphia.
  8. Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
  9. Jörg Döpke & Christian Pierdzioch, 2001. "Inflation and the Skewness of the Distribution of Relative Price Changes: Empirical Evidence for Germany," Kiel Working Papers 1059, Kiel Institute for the World Economy.
  10. Richard De Abreu Lourenco & David Gruen, 1995. "Price Stickiness and Inflation," RBA Research Discussion Papers rdp9502, Reserve Bank of Australia.
  11. Robert A. Amano & R. Tiff Macklem, 1997. "Menu Costs, Relative Prices, and Inflation: Evidence for Canada," Working Papers 97-14, Bank of Canada.
  12. Kilian, Lutz, 2005. "The Effects of Exogenous Oil Supply Shocks on Output and Inflation: Evidence from the G7 Countries," CEPR Discussion Papers 5404, C.E.P.R. Discussion Papers.
  13. María Ángeles Caraballo & Carlos Usabiaga, 2003. "Análisis de la estructura de la inflación de las regiones españolas: La metodología de Ball y Mankiw," Economic Working Papers at Centro de Estudios Andaluces E2003/44, Centro de Estudios Andaluces.
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Cited by:
  1. Diego Romero-�vila & Carlos Usabiaga, 2012. "Disaggregate evidence on Spanish inflation persistence," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3029-3046, August.

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