Deflation and Relative Prices: Evidence from Japan and Hong Kong

Stefan Gerlach () and Peter Kugler

VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis from Verein für Socialpolitik / German Economic Association

Abstract: We test the menu cost model of Ball and Mankiw (1994, 1995) on data from the inflation and deflation periods in Japan and Hong Kong. We calculate the moments of the distribution of price changes using a random split procedure to overcome the bias noted by Cecchetti and Bryan (1999). The key implication of the model, that the parameter on skewness is positive during both inflation and deflation, is strongly supported. The data are less clear on, but does not reject, the hypothesis that the parameter on the standard deviation changes sign between inflation and deflation periods.

Keywords: inflation; deflation; menu costs; Hong Kong; Japan (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: Deflation and Relative Prices: Evidence from Japan and Hong Kong (2007)
Working Paper: Deflation and relative prices: Evidence from Japan and Hong Kong (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc11:48709

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