Relative price variability Which components of the consumer price index contribute towards its variability

Eliphas Ndou and Siobhan Redford

No 6218, Working Papers from South African Reserve Bank

Abstract: This paper follows work by Choi, Kim and OSullivan (2011), but deviates from their analysis by looking at the relative price variability (RPV) of selected components of the consumer price index (CPI) rather than an aggregate measure. The purpose of this work is to analyse which components are more variable and to see if there has been a change in the RPV (i.e., mean and distribution) since the adoption of inflation targeting (IT) in South Africa. A semi-parametric methodology has been used, and the RPV of components pre-IT and during the IT era were considered to see if the relationship of RPV components produces results similar to those presented for aggregate headline CPI for South Africa in Choi et al. (2011). The results suggest that in most cases, the components of the CPI have experienced decreased mean inflation rates and narrower distributions during the IT period with the changes in the mean and distribution of RPV decreasing and narrowing in most cases. Furthermore, the nature of the relationship of the RPV of the components with inflation seems to fit a quadratic specification well, with minimum relative price variability at a positive rate of inflation. These results are found to be fairly robust during the period tested.

Date: 2014-05-06
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.resbank.co.za/content/dam/sarb/publicat ... 2014/6218/WP1402.pdf Revision (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Status read failed: An existing connection was forcibly closed by the remote host.

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:rbz:wpaper:6218

Access Statistics for this paper

More papers in Working Papers from South African Reserve Bank Contact information at EDIRC.
Bibliographic data for series maintained by Jessica VanWyk ().