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Inflation, price dispersion and market integration through the lens of a monetary search model

Sascha Becker and Dieter Nautz ()

No 2010/2, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: Recent monetary search models emphasize that the real effects of inflation via its impact on price dispersion depend on the level of search costs and, thus, on the level of market integration. For less integrated markets, the inflation-price dispersion nexus is predicted to be asymmetrically V-shaped which implies an optimal inflation rate above zero. For highly integrated markets, however, theory suggests that the impact of inflation on price dispersion disappears. Employing price data of the European Union member states, this paper is the first that empirically tests these implications of monetary search theory.

Keywords: Inflation; Relative price variability; Monetary search models; European market integration (search for similar items in EconPapers)
JEL-codes: E31 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Date: 2010
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Related works:
Journal Article: Inflation, price dispersion and market integration through the lens of a monetary search model (2012) Downloads
Working Paper: Inflation, Price Dispersion and Market Integration through the Lens of a Monetary Search Model (2010) Downloads
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