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Intercountry Differences in the Relationship between Relative Price Variability and Average Prices

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Author Info

  • Mick Silver
  • Christos Ioannidis

Abstract

This paper provides new evidence on the relationship between relative price variability and inflation. The model uses a consistently defined data set for nine European countries. It benefits from the inclusion and testing of the effects of macroeconomic variables and the incorporation into the measures of inflation and dispersion adjustments for timeliness, appropriate formulas, and proximity. The general findings of an effect on relative price variability by the macroeconomic environment and negative coefficients on unexpected inflation are supported by their occurrence in models estimated by seemingly unrelated regression and a robust systems estimator.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 109 (2001)
Issue (Month): 2 (April)
Pages: 355-374

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Handle: RePEc:ucp:jpolec:v:109:y:2001:i:2:p:355-374

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Web page: http://www.journals.uchicago.edu/JPE/

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References

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  1. Hercowitz, Zvi, 1981. "Money and the Dispersion of Relative Prices," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 328-56, April.
  2. Barro, Robert J., 1976. "Rational expectations and the role of monetary policy," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 1-32, January.
  3. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
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Citations

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Cited by:
  1. Juliane Scharff & Sven Schreiber, 2012. "Evidence on the effects of inflation on price dispersion under indexation," Empirical Economics, Springer, vol. 43(1), pages 291-311, August.
  2. Banerjee, Anindya & Mizen, Paul & Russell, Bill, 2007. "Inflation, relative price variability and the markup: Evidence from the United States and the United Kingdom," Economic Modelling, Elsevier, vol. 24(1), pages 82-100, January.
  3. María Ángeles Caraballo & Carlos Dabús., 2008. "The Determinants of Relative Price Variability: Further Evidence from Argentina," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 45(132), pages 235-255.
  4. Chi-Young Choi, 2010. "Reconsidering the Relationship between Inflation and Relative Price Variability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 769-798, 08.
  5. Hiranya K. Nath & Natalie Hegwood, 2012. "Structural Breaks and Relative Price Convergence among U.S. Cities," Working Papers 1204, Sam Houston State University, Department of Economics and International Business.
  6. Paul A. Armknecht & Mick Silver, 2012. "Post-Laspeyres," IMF Working Papers 12/105, International Monetary Fund.
  7. 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.
  8. Muhammad Akmal, 2012. "The Relationship between Inflation and Relative Price Variability in Pakistan," Working Papers id:4734, eSocialSciences.
  9. Daniel Berkowitz & David N. DeJong, 2002. "Integration: An Empirical Assessment of Russia," William Davidson Institute Working Papers Series 488, William Davidson Institute at the University of Michigan.
  10. Mª Ángeles Caraballo Pou & Carlos Dabús & Diego Caramuta, 2006. "A Non-linear "Inflation-Relative Prices Variability" Relationship: Evidence from Latin America," Economic Working Papers at Centro de Estudios Andaluces E2006/09, Centro de Estudios Andaluces.
  11. 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.
  12. Madsen, J. B. & Milas, C., 2003. "The price-dividend relationship in inflationary and deflationary regimes," Working Papers 03/05, Department of Economics, City University London.
  13. 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.
  14. Bill Russell, 2002. "The Long Run Relationships among Price Variability, Inflation and the Markup," Dundee Discussion Papers in Economics 127, Economic Studies, University of Dundee.
  15. Robert J Hill, 2004. "Inflation Measurement for Central Bankers," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
  16. André Binette & Sylvain Martel, 2005. "Inflation and Relative Price Dispersion in Canada: An Empirical Assessment," Working Papers 05-28, Bank of Canada.

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