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Relative Price Variability and Inflation

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  • Hartman, Richard

Abstract

Regression studies have established that there tend to be convex, nonsymmetric relationships between relative price variability and the inflation rate, unanticipated inflation, and the change in the inflation rate. This paper shows that such regression results follow as "definitional artifacts" for a simple but quite general stochastic model of price changes. The analysis is based on the fact that the definitions of relative price variability, the inflation rate, unanticipated inflation, and the change in the inflation rate imply a particular structure for the covariances among these variables. The structure of these covariances has implications for the regression coefficients. Copyright 1991 by Ohio State University Press.

Suggested Citation

  • Hartman, Richard, 1991. "Relative Price Variability and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 185-205, May.
    • Handle: RePEc:mcb:jmoncb:v:23:y:1991:i:2:p:185-205
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    Cited by:

    1. Bakhshi, Hasan, 2002. "Inflation and relative price variability," Economics Letters, Elsevier, vol. 76(1), pages 27-33, June.
    2. Rodrigo Cerda & Alvaro Silva & Rolf Lüders, 2021. "Price controls, hyperinflation, and the inflation–relative price variability relationship," Empirical Economics, Springer, vol. 61(4), pages 1725-1748, October.
    3. Bill Russell, 2002. "The Long Run Relationships among Price Variability, Inflation and the Markup," Dundee Discussion Papers in Economics 127, Economic Studies, University of Dundee.
    4. Banerjee, Anindya & Mizen, Paul & Russell, Bill, 2007. "Inflation, relative price variability and the markup: Evidence from the United States and the United Kingdom," Economic Modelling, Elsevier, vol. 24(1), pages 82-100, January.
    5. Tommasi, Mariano, 1996. "Inflation and the Informativeness of Prices: Microeconomic Evidence from High Inflation," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 16(2), November.
    6. Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Papers (Old Series) 9607, Federal Reserve Bank of Cleveland.
    7. Benjamin Eden, 2001. "Inflation and Price Adjustment: An Analysis of Microdata," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 607-636, July.
    8. A. Nazif Çatik & Christopher Martin & A. Özlem Onder, 2011. "Relative price variability and the Phillips Curve: evidence from Turkey," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(5), pages 546-561, September.
    9. Drummond, Paulo, 1993. "Optimum pricing policy, government induced shocks and the dispersion of relative prices in Brazil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 47(4), October.
    10. Chi-Young Choi & Young Se Kim & Róisín O'Sullivan, 2011. "Inflation Targeting and Relative Price Variability: What Difference Does Inflation Targeting Make?," Southern Economic Journal, John Wiley & Sons, vol. 77(4), pages 934-957, April.
    11. Benjamin Eden, 1994. "Inflation and Price Dispersion: An Analysis of Micro Data," Bank of Israel Working Papers 1994.13, Bank of Israel.
    12. Matthias R. Fengler & Joachim K. Winter, 2007. "Price variability and price dispersion in a stable monetary environment: evidence from German retail markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 789-801.
    13. Christos Ioannidis & Mick Silver, 2001. "The influence of inflation on differential price changes across European markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(1), pages 31-47, March.
    14. Stanley C W Salvary, 2008. "Informedness of Economic Agents and the Quantity Theory of Money," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 61-85, February.
    15. Erica L. Groshen & Mark E. Schweitzer, 1994. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Working Papers (Old Series) 9418, Federal Reserve Bank of Cleveland.
    16. Debelle, Guy & Lamont, Owen, 1997. "Relative Price Variability and Inflation: Evidence from U.S. Cities," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 132-152, February.
    17. Elizabeth Caucutt & Mrinal Ghosh & Christina Kelton, 1998. "Robustness of the relationship between price variability and inflation for US manufacturing," Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 513-519.
    18. Chi-Young Choi, 2010. "Reconsidering the Relationship between Inflation and Relative Price Variability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 769-798, August.
    19. David Parsley Helen Popper, 2002. "Inflation And Price Dispersion In Equity Markets And In Goods And Services Markets," Macroeconomics 0211004, University Library of Munich, Germany.
    20. 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.
    21. YAMAK, Rahmi & ERDEM, Havvanur Feyza & KOÇAK, Sinem, 2017. "Relative Price Variability And Inflation In Turkey: Results From Kalman Filter Estimation," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 21(1), pages 28-40.
    22. 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.
    23. Biao Gu & Liying Fu & Kehuan Yu, 2023. "On the dynamic effects of the cross‐section distribution of sectoral price changes in China," International Studies of Economics, John Wiley & Sons, vol. 18(4), pages 468-501, December.
    24. 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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