Price flexibility in developing countries: evidence and implications

Magda Kandil

Applied Economics, 2008, vol. 40, issue 15, 1905-1918

Abstract: Using data for a sample of 50 developing countries, the empirical investigation evaluates determinants and implications of asymmetric price flexibility. Price inflation is characterized by high flexibility to adjust towards full equilibrium. Further, price inflation accelerates flexibly with unanticipated demand growth, in both the upward and downward directions, in most of the countries under investigation. Asymmetry indicates higher upward flexibility compared to downward flexibility in many countries. Aggregate uncertainty determines the degree of asymmetry such that price flexibility is higher with respect to expansionary demand shocks, compared to contractionary shocks, the higher the variability of aggregate demand across countries. In contrast, higher trend price inflation increases downward price flexibility. Across countries, output variability decreases with both upward and downward price flexibility in the face of aggregate demand shocks.

Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840600905290 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:40:y:2008:i:15:p:1905-1918

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840600905290

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().