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Does inflation asymmetrically affect relative price variability?

Author

Listed:
  • Sartaj Rasool Rather
  • S. Raja Sethu Durai
  • M. Ramachandran

Abstract

The U-shaped relationship between inflation and price dispersion around nonzero inflation rate is due to the use of aggregate measure of relative price variability (RPV), which amounts to specification errors in a piecewise linear regression models. However, the true underlying relationship between inflation and inflation-induced RPV is found to be U-shaped around zero inflation and inflation seems to have asymmetric impact on price dispersion as predicted by menu cost models.

Suggested Citation

  • Sartaj Rasool Rather & S. Raja Sethu Durai & M. Ramachandran, 2014. "Does inflation asymmetrically affect relative price variability?," Applied Economics Letters, Taylor & Francis Journals, vol. 21(2), pages 80-83, January.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:2:p:80-83
    DOI: 10.1080/13504851.2013.842632
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    Cited by:

    1. Sartaj Rasool Rather & Sunil Paul & S. Raja Sethu Durai, 2015. "Inflation forecasting and the distribution of price changes," Economics Bulletin, AccessEcon, vol. 35(1), pages 226-232.
    2. 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(61), pages 193-210, September.
    3. 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.
    4. Sartaj Rasool Rather & S. Raja Sethu Durai & M. Ramachandran, 2015. "Inflation and the Dispersion of Component Price Indices: A Case for Four Percent Solution," Working Papers 2015-134, Madras School of Economics,Chennai,India.
    5. Sartaj Rasool Rather & Raja Sethu Durai & Muthia Ramachandran, 2018. "Inflation and the Dispersion of Relative Prices: A Case for 4 % Solution," Australian Economic Papers, Wiley Blackwell, vol. 57(1), pages 81-91, March.
    6. 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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