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Variabiliti harga relatif dan inflasi : bukti empirikal di Semenanjung Malaysia, Sabah dan Sarawak
[Relative price variability and inflation: empirical evidence in Peninsular Malaysia, Sabah and Sarawak]

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  • Abdul Karim, Zulkefly
  • Zaidi, Mohd Azlan Shah
  • Jusoh, Mansor

Abstract

This study investigates the relationship between relative price variability and inflation in three regions in Malaysia namely Peninsular Malaysia, Sabah and Sarawak. Using monthly time series data from January 1970 until Mac 2005, this study utilizes the non-linear time series technique of STAR and LSTAR models. Based on the empirical evidence, it is clearly shown that the relative price variability has non-linear characteristic. In addition, inflation is also significant and positively related to influence the relative price variability in all the three regions. The empirical findings also reveal that the relationship between the relative price variability and inflation is in the form of non-linear. The findings support the menu-cost theory which stipulates that the variability of price will increase when there is an increase in the general price level. Beside that, the stochastic components of relative price variability have shown persistency in all the regions. The study implies that the price control policy and the implementation of monetary policy should also be focused to control relative price stability among the group of goods.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26970.

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Date of creation: Jan 2008
Date of revision: Jun 2008
Publication status: Published in International Journal of Management Studies (IJMS) 15.2(2008): pp. 165-182
Handle: RePEc:pra:mprapa:26970

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Keywords: relative price variability; inflation; STAR; ESTAR;

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  1. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 517-31, October.
  2. Chang, Eric C. & Cheng, Joseph W., 2000. "Further evidence on the variability of inflation and relative price variability," Economics Letters, Elsevier, vol. 66(1), pages 71-77, January.
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  8. Caplin, Andrew S & Spulber, Daniel F, 1987. "Menu Costs and the Neutrality of Money," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 703-25, November.
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  16. Driffill, John & Mizon, Grayham E. & Ulph, Alistair, 1990. "Costs of inflation," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 19, pages 1013-1066 Elsevier.
  17. Fielding, David & Mizen, Paul, 2000. "Relative Price Variability and Inflation in Europe," Economica, London School of Economics and Political Science, vol. 67(265), pages 57-78, February.
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