Relative Price Variability and Inflation: Evidence from U.S. Cities
The authors test whether the time-series positive correlation of inflation and intermarket relative price variability is also present in a cross section of U.S. cities. They find this correlation to be a robust empirical regularity: cities that have higher than average inflation also have higher than average relative price dispersion, ceteris paribus. This result holds for different periods of time, for different classes of goods, and across different time horizons. The authors' results suggest that at least part of the relationship between inflation and relative price variability cannot be explained by monetary factors. Copyright 1997 by the University of Chicago.
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