Price controls, hyperinflation, and the inflation–relative price variability relationship

Rodrigo Cerda, Álvaro Silva and Rolf Lüders ()
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Rolf Lüders: Pontificia Universidad Católica de Chile

Empirical Economics, 2021, vol. 61, issue 4, No 2, 1725-1748

Abstract: Abstract Chile established between 1970 and 1973 a fixed price policy for many products that was eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes and a hyperinflationary environment. We do so using unique monthly data for 23 food products between January 1970 and May 1982. We construct different relative price variability measures and consistently find that the sensitivity of relative price variability to inflation is larger when there is price-fixing.

Keywords: Relative price variability; Inflation; Fixed-price regime (search for similar items in EconPapers)
JEL-codes: E31 E64 E65 N16 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00181-020-01953-w

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