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Price Inertia and Inflation: Evidence and Theoretical Rationale

In: Structural Change, Economic Interdependence and World Development

Author

Listed:
  • M. I. Nadiri

    (New York University and Nber)

Abstract

The phenomenon of price insensitivity to changes in demand in the advanced Western economies has been a subject of considerable discussion among macroeconomists and policy-makers. In recent years prices have not only been rigid downward but have even risen in the face of slack demand. Short-run inflexibility of prices is critical for the success of fiscal and monetary stablisation policies and the ability of economic systems to accommodate external shocks. The question is, what are the causes of price inflexibility and is this consistent with private maximisation principles? How do the dynamic interactions among various stages and types of economic activity lead to price stickiness of the aggregate price level?

Suggested Citation

  • M. I. Nadiri, 1987. "Price Inertia and Inflation: Evidence and Theoretical Rationale," International Economic Association Series, in: Luigi Pasinetti & Peter Lloyd (ed.), Structural Change, Economic Interdependence and World Development, chapter 24, pages 329-357, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-18840-6_24
    DOI: 10.1007/978-1-349-18840-6_24
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    Cited by:

    1. Kibritçioğlu, Aykut, 2002. "Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 43-76.

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