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Inflation and the Skewness of the Distribution of Relative Price Changes: Empirical Evidence for Germany

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  • Döpke, Jörg
  • Pierdzioch, Christian

Abstract

The present paper uses German annual data covering the period 1969-2000 to present evidence on the link between aggregate inflation and the higher-order moments of the distribution of relative price changes. Our empirical findings confirm predictions of contributions to the theoretical literature suggesting that skewness of this distribution is an important explanatory variable for the inflation rate. Further, the skewness measure also helps to explain shifts in the Phillips curve. Moreover, a structural vector autoregression reveals that the skewness measure helps to explain the variations of real output and might, therefore, serve as a measure of supply side shocks hitting the economy.

Suggested Citation

  • 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 Kiel).
    • Handle: RePEc:zbw:ifwkwp:1059
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    Cited by:

    1. Praggya Das & Asish Thomas George, 2017. "Comparison of Consumer and Wholesale Prices Indices in India: An Analysis of Properties and Sources of Divergence," Working Papers id:11981, eSocialSciences.

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    More about this item

    Keywords

    inflation; relative prices; distribution of relative prices changes;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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