Relative Prices and Inflation: New Evidence from Different Inflationary Contexts
This paper carries out a comparative analysis of the inflation effects on relative price variability (RPV) in two economies with a inflationary experiences clearly different: Argentina and Spain. The results indicate non-neutrality of inflation, particularly in extreme inflation. The main determinants of RPV are the inflation rate, its variability, and unexpected inflation. Hence, our results neither supports the â€œmenu-costâ€ approach -there are not monetary rigidities in high inflation-, nor the signal â€œextractionâ€ approach, although the latter seems to be suitable for the Spanish case. In turn, we found significant structural changes in this relation in both countries, which suggest that the Inflation-RPV relation is different among different inflationary regimes
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