Relative prices and inflation: new evidence from different inflationary contexts

M. Angeles Caraballo, Carlos Dabus and Carlos Usabiaga

Applied Economics, 2006, vol. 38, issue 16, 1931-1944

Abstract: This paper analyses the relationship between inflation and relative price variability, in the direction of the latter, in two countries with very different inflationary experiences: Argentina and Spain. To address this objective, using disaggregated price indexes (the Wholesale Price Index for Argentina and the Consumer Price Index for Spain), we delimitate different inflationary regimes and compute a set of regressions for each country. Our results suggest evidence in favour of the non-neutrality of inflation (mostly in hyperinflation periods) and do not support either the menu costs or the signal extraction approaches. We also detect significant structural changes in the relationship depending on the inflationary regime.

Date: 2006
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Working Paper: Relative Prices and Inflation: New Evidence from Different Inflationary Contexts (2004)
Working Paper: Relative Prices and Inflation: New Evidence from Different Inflationary Contexts (2004)
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DOI: 10.1080/00036840500427171

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