Inflation and Relative Price Dispersion: Evidence for Iran

Mohammad Ali Kafaie and Amir Mohammad Moshref
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Mohammad Ali Kafaie: Assistant Professor, University of Shahid Beheshti, Tehran, Iran
Amir Mohammad Moshref: Researcher, University of Shahid Beheshti, Tehran, Iran

Iranian Economic Review (IER), 2013, vol. 18, issue 1, 93-104

Abstract: The recent literature on the welfare cost of inflation emphasizes inflation's effects on the dispersion of relative prices. This paper tests three models that predict a relationship between the Relative Price Dispersion (RPD) and facets of inflation such as expected inflation, unexpected inflation, and inflation uncertainty. These are, correspondingly, the Sheshinski- Weiss menu cost model, the Lucas-Barro signal-extraction model, and the Hercowitz-Cukierman extension of the signal extraction model. The results verify the signal extraction model and its extension in Iran. However, there is no evidence of menu cost model.

Keywords: Efficiency; Risk; Risk and Efficiency Correlation; MEA Multi-Way Analysis; SFA Stochastic Frontier Analysis. (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:18:y:2013:i:1:p:93

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