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On Inflation and Real Price Variability

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  • Danziger, Leif

Abstract

This paper studies the consequences of costly price adjustments for the variability of real prices accompanying inflation. For constant- elasticity demand and cost of production, it is shown that a higher d emand, a lower cost of production, or a lower cost of price adjustmen t leads to less intertemporal variability of real prices. If the marg inal cost of production does not increase "too" fast, then the aver age real price is less than the real price that would prevail in the absence of inflation; additionally, a higher demand, a lower cost of production, or a lower cost of price adjustment leads to a higher lev el of real prices. Copyright 1987 by Oxford University Press.

Suggested Citation

  • Danziger, Leif, 1987. "On Inflation and Real Price Variability," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 285-298, April.
    • Handle: RePEc:oup:ecinqu:v:25:y:1987:i:2:p:285-98
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    Cited by:

    1. Andersen, Torben M. & Stampe Christensen, Morten, 2002. "Contract renewal under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 637-652, April.
    2. Danziger, Leif, 2003. "Inflation, costly price and quantity adjustments, and time spent in the Keynesian regime," Economics Letters, Elsevier, vol. 80(2), pages 161-166, August.

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