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Inflation and Relative Price Variability: New Evidence for the United States

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  • Sascha S. Becker
  • Dieter Nautz

Abstract

This article provides new evidence on the empirical relationship between inflation and relative prices in the United States. In line with the predictions of recent monetary search models, we find that the impact of expected inflation on relative price variability (RPV) has disappeared during the recent period when inflation expectations have been stabilized on a low level. Endogenous break‐point tests are applied to identify the timing and to confirm the significance of the changing role of inflation for RPV. The empirical findings are robust with respect to different price indices, disaggregation levels, and measurement concepts.

Suggested Citation

  • Sascha S. Becker & Dieter Nautz, 2009. "Inflation and Relative Price Variability: New Evidence for the United States," Southern Economic Journal, John Wiley & Sons, vol. 76(1), pages 146-164, July.
    • Handle: RePEc:wly:soecon:v:76:y:2009:i:1:p:146-164
    DOI: 10.4284/sej.2009.76.1.146
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    Cited by:

    1. Becker, Sascha S. & Nautz, Dieter, 2012. "Inflation, price dispersion and market integration through the lens of a monetary search model," European Economic Review, Elsevier, vol. 56(3), pages 624-634.
    2. Becker, Sascha, 2011. "What drives the relationship between inflation and price dispersion? Market power vs. price rigidity," SFB 649 Discussion Papers 2011-019, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    3. 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.

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