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Price controls, hyperinflation, and the inflation–relative price variability relationship

Author

Listed:
  • Rodrigo Cerda

    (Facultad de Derecho, Pontificia Universidad Católica de Chile and ClapesUC (Centro Latinoamericano de Políticas Económicas y Sociales))

  • Alvaro Silva

    (University of Maryland at College Park)

  • Rolf Lüders

    (Pontificia Universidad Católica de Chile)

Abstract

Chile established between 1970 and 1973 a fixed price policy for many products that was eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes and a hyperinflationary environment. We do so using unique monthly data for 23 food products between January 1970 and May 1982. We construct different relative price variability measures and consistently find that the sensitivity of relative price variability to inflation is larger when there is price-fixing.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:empeco:v:61:y:2021:i:4:d:10.1007_s00181-020-01953-w
    DOI: 10.1007/s00181-020-01953-w
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    References listed on IDEAS

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    More about this item

    Keywords

    Relative price variability; Inflation; Fixed-price regime;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean

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