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Relative Price Variability and Inflation

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  • Hartman, Richard

Abstract

Regression studies have established that there tend to be convex, nonsymmetric relationships between relative price variability and the inflation rate, unanticipated inflation, and the change in the inflation rate. This paper shows that such regression results follow as "definitional artifacts" for a simple but quite general stochastic model of price changes. The analysis is based on the fact that the definitions of relative price variability, the inflation rate, unanticipated inflation, and the change in the inflation rate imply a particular structure for the covariances among these variables. The structure of these covariances has implications for the regression coefficients. Copyright 1991 by Ohio State University Press.

Suggested Citation

  • Hartman, Richard, 1991. "Relative Price Variability and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 185-205, May.
  • Handle: RePEc:mcb:jmoncb:v:23:y:1991:i:2:p:185-205
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    Citations

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    Cited by:

    1. Bakhshi, Hasan, 2002. "Inflation and relative price variability," Economics Letters, Elsevier, vol. 76(1), pages 27-33, June.
    2. 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.
    3. 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.
    4. repec:sbe:breart:v:16:y:1996:i:2:a:2875 is not listed on IDEAS
    5. Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Paper 9607, Federal Reserve Bank of Cleveland.
    6. Drummond, Paulo, 1993. "Optimum pricing policy, government induced shocks and the dispersion of relative prices in Brazil," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil), vol. 47(4), October.
    7. Matthias R. Fengler & Joachim K. Winter, 2007. "Price variability and price dispersion in a stable monetary environment: evidence from German retail markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 789-801.
    8. Christos Ioannidis & Mick Silver, 2001. "The influence of inflation on differential price changes across European markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(1), pages 31-47, March.
    9. Stanley C W Salvary, 2008. "Informedness of Economic Agents and the Quantity Theory of Money," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 61-85, February.
    10. Erica L. Groshen & Mark E. Schweitzer, 1994. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Working Paper 9418, Federal Reserve Bank of Cleveland.
    11. Debelle, Guy & Lamont, Owen, 1997. "Relative Price Variability and Inflation: Evidence from U.S. Cities," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 132-152, February.
    12. David Parsley Helen Popper, 2002. "Inflation And Price Dispersion In Equity Markets And In Goods And Services Markets," Macroeconomics 0211004, EconWPA.
    13. repec:rej:journl:v:19:y:2016:i:61:p:193-210 is not listed on IDEAS
    14. Monir Uddin Ahmed & Md. Moniruzzaman Muzib & Md. Mahedi Hasan, 2016. "Inflation, inflation uncertainty and relative price variability in Bangladesh," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 389-427, December.
    15. Nebiye Yamak & Sinem Kocak & Fatma Kolcu, 2016. "Causal Relationship Between Relative Price Variability and Inflation in Turkey:Evidence from Panel Data," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(60), pages 183-198, June.

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