Relative Price Dispersion and the Rate of Inflation: The Evidence from Japan

Sean Holly

Journal of Economic Integration, 1997, vol. 12, 206-226

Abstract:

The relationship between inflation and price variability has been of interest to economists for many years. Recently, Ball and Mankiw [1995] have proposed a menu-cost model of price stickiness in which the skewness of relative price infla - tion matters as well as the standard deviation. In this paper their model is test - ed on Japanese wholesale price data. The results are mixed. When we use the single equation approach of Ball and Mankiw the results appear to favour their model. However, once we condition inflation on the growth in the money stock and allow for the simultaneity of inflation and relative price variability predict - ed by a Lucas type misperceptions model, then the effects postulated by Ball and Mankiw largely disappear, while inflation seems to drive both the standard devi - ation and skewness of relative prices.

Keywords: Relative; Price; Dispersion (search for similar items in EconPapers)
JEL-codes: E30 F41 (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (6)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0047

Access Statistics for this article

Journal of Economic Integration is currently edited by Seongeun Kim

More articles in Journal of Economic Integration from Center for Economic Integration, Sejong University Contact information at EDIRC.
Bibliographic data for series maintained by Yunhoe Kim ().