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On the Granger Causality between Median Inflation and Price Dispersion

Richard Ashley ()
Authors registered in the RePEc Author Service: Haichun Ye ()

Working Papers from Virginia Polytechnic Institute and State University, Department of Economics

Abstract: The Granger-causal relationship between the size and dispersion of fluctuations in sub-components of the U.S. Consumer Price Index (CPI) is examined using both in-sample and post- sample tests and data from January 1968 to December 2008. Strong in-sample evidence is found for feedback between median inflation and price dispersion; the evidence for Granger-causation from median inflation to price dispersion remains strong in out-of-sample testing, but is less strong for Granger-causation in the opposite direction. The implications of these results for the variety of price-level determination models in the literature are discussed.

Keywords: CPI; Granger; Causal Relationship; Price Dispersion; Inflation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2010
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ftp://repec.econ.vt.edu/Papers/Ashley/price_dispersion_causality.pdf First version, 2010 (application/pdf)
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Journal Article: On the Granger causality between median inflation and price dispersion (2012) Downloads
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