IDEAS home Printed from
   My bibliography  Save this article

Relative Price Dispersion and the Rate of Inflation: The Evidence from Japan


  • Holly, Sean

    () (University of Cambridge)


The relationship between inflation and price variability has been of interest to economists for many years. Recently, Ball and Mankiw [1995] have proposed a menu-cost model of price stickiness in which the skewness of relative price infla - tion matters as well as the standard deviation. In this paper their model is test - ed on Japanese wholesale price data. The results are mixed. When we use the single equation approach of Ball and Mankiw the results appear to favour their model. However, once we condition inflation on the growth in the money stock and allow for the simultaneity of inflation and relative price variability predict - ed by a Lucas type misperceptions model, then the effects postulated by Ball and Mankiw largely disappear, while inflation seems to drive both the standard devi - ation and skewness of relative prices.

Suggested Citation

  • Holly, Sean, 1997. "Relative Price Dispersion and the Rate of Inflation: The Evidence from Japan," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 206-226.
  • Handle: RePEc:ris:integr:0047

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Hutchison, Michael & Judd, John P, 1992. "Central Bank Secrecy and Money Surprises: International Evidence," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 135-145, February.
    2. Dueker, Michael & Fischer, Andreas M., 1996. "Inflation targeting in a small open economy: Empirical results for Switzerland," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 89-103, February.
    3. Holland, A Steven, 1995. "Inflation and Uncertainty: Tests for Temporal Ordering," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 827-837, August.
    4. Brunner, Allan D & Hess, Gregory D, 1993. "Are Higher Levels of Inflation Less Predictable? A State-Dependent Conditional Heteroscedasticity Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 187-197, April.
    5. Serletis, Apostolos & King, Martin, 1993. "The role of money in Canada," Journal of Macroeconomics, Elsevier, vol. 15(1), pages 91-107.
    6. Apergis, Nicholas, 1997. "Inflation uncertainty, money demand, and monetary deregulation: Evidence from a univariate ARCH model and cointegration tests," Journal of Policy Modeling, Elsevier, vol. 19(3), pages 279-293, June.
    7. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    8. Froyen, Richard T & Waud, Roger N, 1987. "An Examination of Aggregate Price Uncertainty in Four Countries and Some Implications for Real Output," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 353-372, June.
    9. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
    10. Christiano, Lawrence J. & Ljungqvist, Lars, 1988. "Money does Granger-cause output in the bivariate money-output relation," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 217-235, September.
    11. Daniel Racette & Jacques Raynauld, 1992. "Canadian Monetary Policy: Will the Checklist Approach Ever Get Us to Price Stability?," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 819-838, November.
    12. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    13. Nikos Apergis & John Papanastasiou & Kostas Velentzas, 1997. "The credibility of policy announcements: Greek evidence," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 699-705.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Döpke, Jörg & Pierdzioch, Christian, 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 (IfW).
    2. A. Nazif Çatik & Christopher Martin & A. Özlem Onder, 2011. "Relative price variability and the Phillips Curve: evidence from Turkey," Journal of Economic Studies, Emerald Group Publishing, vol. 38(5), pages 546-561, September.
    3. Döpke Jörg & Pierdzioch Christian, 2003. "Inflation and the Skewness of the Distribution of Relative Price Changes: Empirical Evidence for Germany / Inflation und die Schiefe der Verteilung relativer Preisänderungen: Empirische Evidenz für De," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(2), pages 136-158, April.
    4. Hayo, Bernd & Ono, Hiroyuki, 2015. "Explaining inflation in the period of quantitative easing in Japan: Relative-price changes, aggregate demand, and monetary policy," Journal of Asian Economics, Elsevier, vol. 36(C), pages 72-85.

    More about this item


    Relative; Price; Dispersion;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:integr:0047. 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: (Jong-Eun Lee). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.