Inflation and Relative Price Variability: The U.K. Experience over the Last 30 Years

Andrew Smith and Neil J MacKinnon

Scottish Journal of Political Economy, 1987, vol. 34, issue 2, 145-60

Abstract: Little evidence is found of a stable structural relationship between aggregate inflation and relative price variability in the Un ited Kingdom. The main contributors to relative price variability are prices of goods that are sensitive to policy changes such as alcohol and tobacco, rates, and rents. This contrasts with the U.S. experien ce where changes in relative price variability can be traced to commo dity price shocks, rather than policy. The implications for the desig n of anti-inflation policy is to note the effects on variability that policy actions can cause, to appreciate that some variability may be "warranted," and to focus on price regidities in key markets. Copyright 1987 by Scottish Economic Society.

Date: 1987
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