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Inflation and Relative Price Variability: The U.K. Experience over the Last 30 Years

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  • Smith, Andrew
  • MacKinnon, Neil J

Abstract

Little evidence is found of a stable structural relationship between aggregate inflation and relative price variability in the Un ited Kingdom. The main contributors to relative price variability are prices of goods that are sensitive to policy changes such as alcohol and tobacco, rates, and rents. This contrasts with the U.S. experien ce where changes in relative price variability can be traced to commo dity price shocks, rather than policy. The implications for the desig n of anti-inflation policy is to note the effects on variability that policy actions can cause, to appreciate that some variability may be "warranted," and to focus on price regidities in key markets. Copyright 1987 by Scottish Economic Society.

Suggested Citation

  • Smith, Andrew & MacKinnon, Neil J, 1987. "Inflation and Relative Price Variability: The U.K. Experience over the Last 30 Years," Scottish Journal of Political Economy, Scottish Economic Society, vol. 34(2), pages 145-160, May.
    • Handle: RePEc:bla:scotjp:v:34:y:1987:i:2:p:145-60
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    References listed on IDEAS

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    1. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
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    5. Cukierman, Alex, 1983. "Relative price variability and inflation: A survey and further results," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 103-157, January.
    6. Taylor, John B., 1981. "On the relation between the variability of inflation and the average inflation rate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 57-85, January.
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    9. Mussa, Michael L, 1977. "The Welfare Cost of Inflation and the Role of Money as a Unit of Account," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(2), pages 276-286, May.
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