Nonlinear Impact of Inflation on Relative Price Variability

Mustafa Caglayan () and Alpay Filiztekin

No 2001_02, Working Papers from University of Liverpool, Department of Economics

Abstract: In this paper we investigate the link between inflation and relative price variability, and the impact of structural changes in the behavior of inflation using a half-a-century long disaggregated data. Employing panel data techniques to control for aggregate shocks, we show that: 1) the effect of inflation is non-neutral: relative price variability has increased in inflationary as well as deflationary periods, 2) the association between inflation and relative price variability is highly nonlinear 3) there is strong support for menu cost models, but none for signal extraction models.

Keywords: Inflation; Price variability; Nonlinearity; Panel data. (search for similar items in EconPapers)
JEL-codes: C23 E31 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2001, Revised 2002-10-01
Note: This paper was previously circulated as "Relative Price Variability and Inflation: New evidence from Turkey"
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Citations: View citations in EconPapers (3)

Forthcoming, Economics Letters

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Journal Article: Nonlinear impact of inflation on relative price variability (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:2001_02

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