Relative-price Changes as Aggregate Supply Shocks PDF Download
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Author: Laurence M. Ball
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 40
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Book Description
Author: Laurence M. Ball
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 40
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Book Description
Author: Hiranya K. Nath
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper estimates a fixed effects regression model using panel data on prices for U.S. cities to test the supply-side theory of inflation that takes the distribution of relative price changes as an aggregate supply shock. The results indicate that the positive correlation between inflation and relative price variability is a robust empirical regularity that gives some credibility to the supplyside theory of inflation. During the early 1980s this relationship, though positive, weakens which indicates predominance of monetary shocks in determining changes in the aggregate price level. On the other hand, inflation and skewness are not found to be strongly related when aggregate macroeconomic effects are controlled.
Author: Carlos Balseyro Rodriguez
Publisher:
ISBN:
Category :
Languages : es
Pages : 40
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Author: Laurence M. Ball
Publisher:
ISBN:
Category :
Languages : en
Pages : 193
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This paper proposes a theory of supply shocks, or shifts in the short-run Phillips curve, based on relative-price changes and frictions in nominal price adjustment. When price adjustment is costly, firms adjust to large shocks but not to small shocks, and so large shocks have disproportionate effects on the price level. Therefore, aggregate inflation depends on the distribution of relative-price changes: inflation rises when the distribution is skewed to the right, and falls when the distribution is skewed to the left. We show that this theoretical result explains a large fraction of movements in postwar U.S. inflation. Moreover, our model suggests measures of supply shocks that perform better than traditional measures, such as the relative prices of food and energy.
Author:
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Category :
Languages : en
Pages :
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Author: Sartaj Rasool Rather
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659414084
Category :
Languages : en
Pages : 60
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Book Description
It widely believed that the rate of inflation in the long run is determined by growth rate of money supply. However, the short run dynamics of inflation is more complicated in nature. The past experience of inflation dynamics shows that the rate of inflation fluctuates around its underlying trend in the short-run. In literature these short-run fluctuations in rate of inflation are mainly attributed to changes in relative prices of certain commodities due to supply shocks. In this context, examining the effects these shocks on the distribution of price changes has gained importance so as to understand these transitory deviations in inflation. In this backdrop, this book examines whether variations in skewness of distribution of relative price changes influence the aggregate inflation.The empirical analysis is carried out by using commodity wise Wholesale Price Index data from India. Further various theoretical paradigms underlying this relationship are also discussed.
Author: Alan S. Blinder
Publisher: Elsevier
ISBN: 1483264564
Category : Business & Economics
Languages : en
Pages : 244
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Book Description
Economic Policy and the Great Stagflation discusses the national economic policy and economics as a policy-oriented science. This book summarizes what economists do and do not know about the inflation and recession that affected the U.S. economy during the years of the Great Stagflation in the mid-1970s. The topics discussed include the basic concepts of stagflation, turbulent economic history of 1971-1976, anatomy of the great recession and inflation, and legacy of the Great Stagflation. The relation of wage-price controls, fiscal policy, and monetary policy to the Great Stagflation is also elaborated. This publication is beneficial to economists and students researching on the history of the Great Stagflation and policy errors of the 1970s.
Author: Shruti Tripathi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The paper examines how relative price shocks can affect the price level and then inflation. Using Indian data, it is observed that: (1) Price increases exceed price decreases. Aggregate inflation depends on the distribution of relative price changes -- inflation rises when the distribution is skewed to the right; (2) Such distribution-based measures of supply shocks perform better than the traditional measures, such as prices of energy and food. They moderate the price puzzle, whereby a rise in policy rates increases inflation, are significant in estimations of New Keynesian aggregate supply, and show the Indian aggregate supply curve to be flat, but subject to shifts; (3) An average Indian firm changes prices about once in a year. The estimated Calvo parameter implies that half of the Indian firms reset their prices in any period, while 66% of firms are forward looking in their price setting. These estimated real and nominal price rigidities imply policy needs to anchor inflationary expectations in response to supply shocks, but policy responses must be moderate.
Author: Jörg Döpke
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Author: Ricardo Reis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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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.
