The Relationship between Price Dispersion and Inflation: A Reassessment
نویسندگان
چکیده
The positive relationship between inflation and relative price variability has been taken as a proven case, but recent evidence casts doubt on the verdict. This paper shows that theory can support positive or negative relationships, while past empirical evidence may have been contaminated by aggregation bias and our measures of price dispersion and inflation. We re-examine the empirical evidence for ten years of data over nine commodity groups and seven European countries using a non-parametric approach to estimate the functional form.. Our results suggest that the results offer strong support for the model of Danziger (1987) which predicts a nonlinear functional form for within-commodity across-countries data. § The authors are from University of Leicester and University of Nottingham respectively. This paper was written while the second author was a visiting professor at the European University Institute, Florence. We wish to thank Mike Artis, Anindya Banerjee, Guiseppe Bertola, and Soren Johansen for helpful comments. Any remaining errors are our own.
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تاریخ انتشار 2001