Inflation and real sectoral output shares: Dynamic panel model evidence from seven OECD countries

George Davis (), David Hineline and Bryce Kanago ()

Journal of Macroeconomics, 2011, vol. 33, issue 4, 607-619

Abstract: Models of the cost of inflation often conclude that inflation misallocates resources. For example, inflation may lead to an increase in the variability of relative prices and it is often claimed that this increase in variability leads to a misallocation of resources. This claim raises the following empirical question, does inflation alter the composition of real output; that is, does it change real output shares? We examine this question using dynamic panel data methods for nine sector panels each with seven OECD countries from 1970 to 2005. We find evidence that inflation changes the real shares of some sectors even when inflation is treated as endogenous.

Keywords: Costs of inflation; Relative-price variability; Misallocation of resources; Sectoral output shares (search for similar items in EconPapers)
JEL-codes: C33 E31 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:33:y:2011:i:4:p:607-619

DOI: 10.1016/j.jmacro.2011.06.002

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