Nominal rigidities, skewness and inflation regimes
The menu-costs model developed by Ball and Mankiw (BM) [Ball, L., Mankiw, N.G., 1994. Asymmetric price adjustment and economic fluctuations. Economic Journal 104 (423), 247-261; Ball, L., Mankiw, N.G., 1995. Relative-Price Changes as Aggregate supply shocks. Quarterly Journal of Economics 110 (1), 161-193] predicts that inflation is positively related to the skewness of price changes distribution. We test this prediction in different inflationary contexts: Spain (1975-2002) and Argentina (1960-1989). We find a positive inflation-skewness relationship in both countries at low inflation, even though the mean annual inflation rates were very different: 2.2% for Spain and 23% for Argentina. Therefore, the threshold of low inflation under which the menu-costs model is suitable is determined endogenously, and it depends on the inflationary experience of each economy. In the higher inflation periods skewness is not significant. Finally, our results suggest that the menu-costs model is not suitable beyond certain threshold of inflation.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 62 (2008)
Issue (Month): 1 (March)
Pages: 16-33
| Handle: | RePEc:eee:reecon:v:62:y:2008:i:1:p:16-33 |
| Contact details of provider: | Web page: http://www.elsevier.com/locate/inca/622941
|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Donald W.K. Andrews & Werner Ploberger, 1992.
"Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative,"
Cowles Foundation Discussion Papers
1015, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
- Laurence Ball & N. Gregory Mankiw, 1993.
"Relative-price changes as aggregate supply shocks,"
Working Papers
93-13, Federal Reserve Bank of Philadelphia.
- Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 161-193.
- Ball, L. & Mankiw, G.H., 1992. "Relative-Price Change as Aggregate Supply Shocks," Harvard Institute of Economic Research Working Papers 1609, Harvard - Institute of Economic Research.
- Laurence Ball & N. Gregory Mankiw, 1992. "Relative-Price Changes as Aggregate Supply Shocks," NBER Working Papers 4168, National Bureau of Economic Research, Inc.
- Robert A. Amano & R. Tiff Macklem, 1997. "Menu Costs, Relative Prices, and Inflation: Evidence for Canada," Staff Working Papers 97-14, Bank of Canada.
- Donald W.K. Andrews, 1990.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Cowles Foundation Discussion Papers
943, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
- María Ángeles Caraballo & Carlos Dabús & Carlos Usabiaga, 2004.
"Relative Prices and Inflation: New Evidence from Different Inflationary Contexts,"
Economic Working Papers at Centro de Estudios Andaluces
E2004/71, Centro de Estudios Andaluces.
- M. Angeles Caraballo & Carlos Dabus & Carlos Usabiaga, 2006. "Relative prices and inflation: new evidence from different inflationary contexts," Applied Economics, Taylor & Francis Journals, vol. 38(16), pages 1931-1944.
- Carlos Usabiaga. & MarÃa à ngeles Caraballo & Carlos Dabús, 2004. "Relative Prices and Inflation: New Evidence from Different Inflationary Contexts," Econometric Society 2004 Latin American Meetings 338, Econometric Society.
- Vining, Daniel R, Jr & Elwertowski, Thomas C, 1976. "The Relationship between Relative Prices and the General Price Level," American Economic Review, American Economic Association, vol. 66(4), pages 699-708, September.
- Parks, Richard W, 1978. "Inflation and Relative Price Variability," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 79-95, February.
- Jörg Döpke & Christian Pierdzioch, 2003.
"Inflation and the Skewness of the Distribution of Relative Price Changes - Empirical Evidence for Germany,"
Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik),
Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(2), pages 136-158.
- 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.
- Ball, Laurence & Mankiw, N Gregory, 1994.
"Asymmetric Price Adjustment and Economic Fluctuations,"
Economic Journal,
Royal Economic Society, vol. 104(423), pages 247-61, March.
- Laurence Ball & N. Gregory Mankiw, 1992. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
- 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.
- Ghysels, Eric & Perron, Pierre, 1993.
"The effect of seasonal adjustment filters on tests for a unit root,"
Journal of Econometrics,
Elsevier, vol. 55(1-2), pages 57-98.
- Ghysels, E. & Perron, P., 1990. "The Effect Of Seasonal Adjustment Filters On Tests For A Unit Root," Papers 355, Princeton, Department of Economics - Econometric Research Program.
- Ghysels, Eric, 1990. "Unit-Root Tests and the Statistical Pitfalls of Seasonal Adjustment: The Case of U.S. Postwar Real Gross National Product," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 145-52, April.
- Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:62:y:2008:i:1:p:16-33. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.