Author: Klaus Adam
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 0
Book Description
Using a novel identification approach derived from sticky price theories with time or state-dependent adjustment frictions, we empirically identify the effect of inflation on relative price distortions. Our approach can be directly applied to micro price data, does not rely on estimating the gap between actual and flexible prices, and only assumes stationarity of unobserved shocks. Using U.K. CPI micro price data, we document that suboptimally high (or low) inflation is associated with distortions in relative prices that are highly statistically significant. At the aggregate level, fluctuations in inefficient price dispersion are sizable and covary positively with aggregate inflation. In contrast, overall price dispersion fails to covary with inflation because it is mainly driven by trends in the dispersion of flexible prices.
Inflation Distorts Relative Prices
Author: Klaus Adam
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 0
Book Description
Using a novel identification approach derived from sticky price theories with time or state-dependent adjustment frictions, we empirically identify the effect of inflation on relative price distortions. Our approach can be directly applied to micro price data, does not rely on estimating the gap between actual and flexible prices, and only assumes stationarity of unobserved shocks. Using U.K. CPI micro price data, we document that suboptimally high (or low) inflation is associated with distortions in relative prices that are highly statistically significant. At the aggregate level, fluctuations in inefficient price dispersion are sizable and covary positively with aggregate inflation. In contrast, overall price dispersion fails to covary with inflation because it is mainly driven by trends in the dispersion of flexible prices.
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 0
Book Description
Using a novel identification approach derived from sticky price theories with time or state-dependent adjustment frictions, we empirically identify the effect of inflation on relative price distortions. Our approach can be directly applied to micro price data, does not rely on estimating the gap between actual and flexible prices, and only assumes stationarity of unobserved shocks. Using U.K. CPI micro price data, we document that suboptimally high (or low) inflation is associated with distortions in relative prices that are highly statistically significant. At the aggregate level, fluctuations in inefficient price dispersion are sizable and covary positively with aggregate inflation. In contrast, overall price dispersion fails to covary with inflation because it is mainly driven by trends in the dispersion of flexible prices.
Inflation and relative prices in an open economy
Author: Bengt Assarsson
Publisher:
ISBN:
Category :
Languages : sv
Pages :
Book Description
Publisher:
ISBN:
Category :
Languages : sv
Pages :
Book Description
Relative Prices and Inflation
Author: Andrew M. Smith
Publisher:
ISBN:
Category : Debt-to-equity ratio
Languages : en
Pages : 34
Book Description
Publisher:
ISBN:
Category : Debt-to-equity ratio
Languages : en
Pages : 34
Book Description
Inflation, Stagflation, Relative Prices, and Imperfect Information
Author: Alex Cukierman
Publisher: Cambridge University Press
ISBN: 9780521070843
Category : Business & Economics
Languages : en
Pages : 0
Book Description
This book surveys the imperfect-information approach to inflation and its real effects. Two types of informational limitation are considered. One involves situations in which individuals have asymmetric information about the current general price level and consequently confuse relative and aggregate changes in prices. The other considers situations in which individuals cannot distinguish permanent from transitory changes as soon as they occur, creating a temporary but persistent confusion between such changes. The author presents the arguments within the context of the recent re-evaluations by economists of previously established views concerning inflation and its interaction with real phenomena.
Publisher: Cambridge University Press
ISBN: 9780521070843
Category : Business & Economics
Languages : en
Pages : 0
Book Description
This book surveys the imperfect-information approach to inflation and its real effects. Two types of informational limitation are considered. One involves situations in which individuals have asymmetric information about the current general price level and consequently confuse relative and aggregate changes in prices. The other considers situations in which individuals cannot distinguish permanent from transitory changes as soon as they occur, creating a temporary but persistent confusion between such changes. The author presents the arguments within the context of the recent re-evaluations by economists of previously established views concerning inflation and its interaction with real phenomena.
Asymmetric Information, Expectations, and the Dynamics of Inflation and Relative Prices
Author: B. Dianne Pauls
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 578
Book Description
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 578
Book Description
Relative Goods' Prices and Pure Inflation
Author: Ricardo Reis
Publisher:
ISBN:
Category : Consumer goods
Languages : en
Pages : 50
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three components: idiosyncratic relative-price changes, aggregate relative-price changes, and changes in the unit of account. The model identifies a measure of "pure" inflation: the common component in goods' inflation rates that has an equiproportional effect on all prices and is uncorrelated with relative price changes at all dates. The estimates of pure inflation and of the aggregate relative-price components allow us to re-examine three classic macro-correlations. First, we find that pure inflation accounts for 15-20% of the variability in overall inflation, so that most changes in inflation are associated with changes in goods' relative prices. Second, we find that the Phillips correlation between inflation and measures of real activity essentially disappears once we control for goods' relative-price changes. Third, we find that, at business-cycle frequencies, the correlation between inflation and money is close to zero, while the correlation with nominal interest rates is around 0.5, confirming previous findings on the link between monetary policy and inflation.
Publisher:
ISBN:
Category : Consumer goods
Languages : en
Pages : 50
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three components: idiosyncratic relative-price changes, aggregate relative-price changes, and changes in the unit of account. The model identifies a measure of "pure" inflation: the common component in goods' inflation rates that has an equiproportional effect on all prices and is uncorrelated with relative price changes at all dates. The estimates of pure inflation and of the aggregate relative-price components allow us to re-examine three classic macro-correlations. First, we find that pure inflation accounts for 15-20% of the variability in overall inflation, so that most changes in inflation are associated with changes in goods' relative prices. Second, we find that the Phillips correlation between inflation and measures of real activity essentially disappears once we control for goods' relative-price changes. Third, we find that, at business-cycle frequencies, the correlation between inflation and money is close to zero, while the correlation with nominal interest rates is around 0.5, confirming previous findings on the link between monetary policy and inflation.
The Relationship Between Inflation and Relative Prices
Author: Veena Mishra
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 250
Book Description
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 250
Book Description
Relative Goods' Prices, Pure Inflation, and the Phillips Correlation
Author: Ricardo Reis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three independent components: idiosyncratic relative-price changes, a low-dimensional index of aggregate relative-price changes, and an index of equiproportional changes in all inflation rates, that we label "pure" inflation. The paper estimates the model on U.S. data since 1959, and it presents a simple structural model that relates the three components of price changes to fundamental economic shocks. We use the estimates of the pure inflation and aggregate relative-price components to answer two questions. First, what share of the variability of inflation is associated with each component, and how are they related to conventional measures of monetary policy and relative-price shocks? We find that pure inflation accounts for 15-20% of the variability in inflation while our aggregate relative-price index accounts most of the rest. Conventional measures of relative prices are strongly but far from perfectly correlated with our relative-price index; pure inflation is only weakly correlated with money growth rates, but more strongly correlated with nominal interest rates. Second, what drives the Phillips correlation between inflation and measures of real activity? We find that the Phillips correlation essentially disappears once we control for goods' relative-price changes. This supports modern theories of inflation dynamics based on price rigidities and many consumption goods.
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three independent components: idiosyncratic relative-price changes, a low-dimensional index of aggregate relative-price changes, and an index of equiproportional changes in all inflation rates, that we label "pure" inflation. The paper estimates the model on U.S. data since 1959, and it presents a simple structural model that relates the three components of price changes to fundamental economic shocks. We use the estimates of the pure inflation and aggregate relative-price components to answer two questions. First, what share of the variability of inflation is associated with each component, and how are they related to conventional measures of monetary policy and relative-price shocks? We find that pure inflation accounts for 15-20% of the variability in inflation while our aggregate relative-price index accounts most of the rest. Conventional measures of relative prices are strongly but far from perfectly correlated with our relative-price index; pure inflation is only weakly correlated with money growth rates, but more strongly correlated with nominal interest rates. Second, what drives the Phillips correlation between inflation and measures of real activity? We find that the Phillips correlation essentially disappears once we control for goods' relative-price changes. This supports modern theories of inflation dynamics based on price rigidities and many consumption goods.
Relative Goods' Prices, Pure Inflation, and the Phillips Correlation
Author: Ricardo Reis
Publisher:
ISBN:
Category :
Languages : en
Pages : 60
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three independent components: idiosyncratic relative-price changes, a low-dimensional index of aggregate relative-price changes, and an index of equiproportional changes in all inflation rates, that we label quot;purequot; inflation. The paper estimates the model on U.S. data since 1959, and it presents a simple structural model that relates the three components of price changes to fundamental economic shocks. We use the estimates of the pure inflation and aggregate relative-price components to answer two questions. First, what share of the variability of inflation is associated with each component, and how are they related to conventional measures of monetary policy and relative-price shocks? We find that pure inflation accounts for 15-20% of the variability in inflation while our aggregate relative-price index accounts most of the rest. Conventional measures of relative prices are strongly but far from perfectly correlated with our relative-price index; pure inflation is only weakly correlated with money growth rates, but more strongly correlated with nominal interest rates. Second, what drives the Phillips correlation between inflation and measures of real activity? We find that the Phillips correlation essentially disappears once we control for goods' relative-price changes. This supports modern theories of inflation dynamics based on price rigidities and many consumption goods.
Publisher:
ISBN:
Category :
Languages : en
Pages : 60
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three independent components: idiosyncratic relative-price changes, a low-dimensional index of aggregate relative-price changes, and an index of equiproportional changes in all inflation rates, that we label quot;purequot; inflation. The paper estimates the model on U.S. data since 1959, and it presents a simple structural model that relates the three components of price changes to fundamental economic shocks. We use the estimates of the pure inflation and aggregate relative-price components to answer two questions. First, what share of the variability of inflation is associated with each component, and how are they related to conventional measures of monetary policy and relative-price shocks? We find that pure inflation accounts for 15-20% of the variability in inflation while our aggregate relative-price index accounts most of the rest. Conventional measures of relative prices are strongly but far from perfectly correlated with our relative-price index; pure inflation is only weakly correlated with money growth rates, but more strongly correlated with nominal interest rates. Second, what drives the Phillips correlation between inflation and measures of real activity? We find that the Phillips correlation essentially disappears once we control for goods' relative-price changes. This supports modern theories of inflation dynamics based on price rigidities and many consumption goods.
Sources of Fluctuations in Relative Prices
Author: John Harold Rogers
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 34
Book Description
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 34
Book Description