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Causality Inflation-Relative ,Prices: Comparative Evidence From Latin-America

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  • Dabús, Carlos
  • Cerioni, Liliana

Abstract

In this paper we study the causality in the relation between inflation and relative price variability for six Latin-American countries with inflationary history: Argentina, Brazil, Peru, Mexico, Uruguay and Venezuela. The study is carried out in the framework of four inflationary regimes: moderate, high, very high and hyperinflation. There is a positive relation in most cases, with a systematic increase of price variability at higher inflation. Inflation volatility and the dummies that represent the regime of inflation are the best explanatory variables of relative price variability, while the causality analysis shows two main results: instantaneous causality and a Granger causality relation from inflation to price variability. In all cases the effect of inflation on relative prices is more significant in extreme inflation, so that the non-neutrality of inflation seems to be increasing with the level of inflation.

Suggested Citation

  • Dabús, Carlos & Cerioni, Liliana, 2000. "Causality Inflation-Relative ,Prices: Comparative Evidence From Latin-America," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 20(2), November.
  • Handle: RePEc:sbe:breart:v:20:y:2000:i:2:a:2759
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    References listed on IDEAS

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    1. Domberger, Simon, 1987. "Relative Price Variability and Inflation: A Disaggregated Analysis," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 547-566, June.
    2. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-389, April.
    3. Mariano Tommasi, 1994. "Inflation and the Informativeness of Prices Microeconomic Evidence from High Inflation," UCLA Economics Working Papers 718, UCLA Department of Economics.
    4. Rogers, John H & Wang, Ping, 1993. "Sources of Fluctuations in Relative Prices: Evidence from High Inflation Countries," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 589-605, November.
    5. 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.
    6. Parks, Richard W, 1978. "Inflation and Relative Price Variability," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 79-95, February.
    7. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    Cited by:

    1. 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.

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