inflation and relative price variability in the euro area evidence from a panel threshold model the impact of inflation on relative price variability rpv generates an important channel for real effects of inflation this article provides first evidence on the empirical relation between inflation and rpv in the euro area stirred by the widespread use of inflation caps or target bands in monetary policy practice we are particularly interested in threshold effects of inflation in line with the predictions of monetary search models our results indicate that expected inflation significantly increases rpv only if inflation is either very low below 0 95 per annum p a or very high above 4 96 p a

testing for asymmetric information in insurance markets the first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context we also argue that insurance data are particularly well suited to such empirical investigations to illustrate this claim we use data on contracts and accidents to investigate the extent of asymmetric information in the french market for automobile insurance using various parametric and nonparametric methods we find no evidence for the presence of asymmetric information in this market

inflation and relative price variability parks study reexamined the authors show that richard w parks 1978 widely cited evidence on the correlation between the rate of inflation and the variability of relative prices in the united states during 1948 75 depends on one observation 1974 when the sample period is extended through 1989 the correlation depends on the observations for 1974 and 1980 since both are years of large oil price shocks the authors make the case that causation is likely to run from these shocks to relative price variability and inflation with accommodating monetary policy playing a role copyright 1993 by ohio state university press

the optimum quantity of money theory and evidence in this paper we propose a simple and general model for computing the ramsey optimal inflation tax which includes several models from the previous literature as special cases we show that it cannot be claimed that the friedman rule is always optimal or always non optimal on theoretical grounds the friedman rule is optimal or not depending on conditions related to the shape of various relevant functions one contribution of this paper is to relate these conditions to measurable variables such as the interest rate or the consumption elasticity of money demand we find that it tends to be optimal to tax money when there are economies of scale in the demand for money the scale elasticity is smaller than one and or when money is required for the payment of consumption or wage taxes we find that it tends to be optimal to tax money more heavily when the interest elasticity of money demand is small we present empirical evidence on the parameters that determine the optimal inflation tax calibrating the model to a variety of empirical studies yields an optimal nominal interest rate of less than 1 per year although that finding is sensitive to the calibration

the behavior of prices and inflation an empirical analysis of disaggregat price data this paper analyzes the effects of inflation on the dispersion of prices as well as other aspects of price behavior using disaggregated data on prices of foodstuffs in israel during 1978 84 we find that the effect of expected inflation on intramarket price variability is stronger than the effect of unexpected inflation we show that even in times of high inflation price quotations are not trivially short and price changes are not synchronized across firms these facts taken together confirm that there is some staggering in the setting of prices we find that the distribution of real prices is far from being uniform as many menu cost based models assume or conclude in fact as inflation increases to very high levels this distribution is not even symmetric when the annual inflation rate reaches 130 percent there are equal chances of finding real prices above or below the market average but upward deviations in the real price are further away from zero than downward ones furthermore as the annu

reconsidering the relationship between inflation and relative price variability it has long been popularly believed that the relationship between inflation and relative price variability rpv is positive and stable using disaggregated cpi data for the united states and japan however this study finds that the relationship is neither linear nor stable over time the overall relationship is approximately u shaped around a nonzero threshold inflation rate rpv therefore changes not with the inflation rate per se but with the deviation of inflation from the threshold inflation rate more importantly the relationship is by no means stable over time but instead varies significantly in a way that coincides with regime changes of inflation or monetary policy the relationship was positive during the period of high inflation of the 1970s and the early 1980s as has been documented by a number of previous studies whereas it takes a u shape profile during the great moderation the results are robust to the use of core inflation which excludes the traditionally volatile prices of food and energy this paper then presents a modified version of the calvo type sticky price model to describe the observed empirical regularities simulation experiments show that the modified calvo model fits the data well and that the underlying relationship hinges upon the degree of price rigidity which is systematically related to inflation regime for countries and periods with low inflation rates the relationship takes a u shape as price adjustment is more sticky in a high inflation environment when price setting becomes more flexible the u shaped profile vanishes

trends in unemployment duration data a method of estimating the distribution of uninterrupted unemploymentspells from aggregate unemployment data is outlined the methodology does not i mpose constant individual hazard rates and allows for heterogeneity characteris tics of the distribution of unemployment spells are then considered including ha zard rates measures of inequality such as gini coefficients and the fraction o f total unemployment associated with s weeks of unemploy ment the relationship between these char acteristics and labor demand variables gnp and supply side variables transfer payments unemployment insurance is considered in or der to better understand the relative role of short and long run unemployment copyright 1986 by mit press

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

evidence on the functional relationship between relative price variability and inflation with implications for monetary policy this paper considers the functional relationship between relative price variability rpv and inflation using quarterly personal consumer expenditure data in the us over 1967q1 2003q1 deriving some implications for monetary policy non parametric regression techniques are used to explore the shape of the rpv function and this shape is related to the theory outlined by rotemberg 1982 1983 the empirical rpv function yields a plausible optimal value of inflation in the region of five percentage points which is consistent with this theory and lies within the range of values cited by recent evaluations of sand and grease effects

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

inflation inflation uncertainty and relative price dispersion evidence from bivariate garch m models abstract one potential real effect of inflation is its influence on the dispersion of relative prices in the economy menu cost models generally imply that higher trend inflation will increase price dispersion in contrast signal extraction models predict that increased inflation uncertainty will raise relative price dispersion existing empirical studies do not distinguish between these separate hypotheses we constuct a bivariate garch m model of inflation and relative price dispersion to test these differing explanations in a single model and find that inflation uncertainty dominates trend inflation as a predictor of relative price dispersion

inflation and the distribution of price changes this paper reconsiders the empirical evidence connecting inflation to its higher order moments in particular we examine the statistical properties of the observed positive correlation between the sample mean and the sample cross sectional skewness of price changes this correlation has attracted substantial attention over the years and has recently been the focal point of a debate among macroeconomists we show that the sample mean skewness correlation suffers from a small sample bias that accounts for the entirety of the observed correlation in other words we establish that one of the stylized facts in the literature on aggregate price behavior need not be a fact at all

relating inertia and experience in technology markets an analysis of households personal computer choices this article empirically analyses how households pc purchasing behaviours change with market experience we find that households generally exhibit inertia in their pc purchases the level of inertia is increasing as a function of experience on the pc market and for households switching brands the likelihood of buying a lesser known brand increases with experience regardless of the brand of the previous purchase these findings are consistent with the predictions of a simple learning model and extend our understanding of how market experience affects purchasing behaviour to an important technology product with implications that may apply to other similar products

cast demographics unobserved segments and heterogeneous switching costs in a television viewing choice model abstract an accurate television viewing choice model is an important tool for television executives and advertisers the authors present a new viewing choice model which differs from the traditional rust alpert model in three ways 1 it introduces a new show characteristic the demographic characteristics of a show s cast 2 it allows the preferences over the traditional show categories to be a function of both observable and unobservable individual characteristics and 3 it allows the cost of switching among the viewing alternatives to vary across show types and individual characteristics cross validated predictive testing shows that this model fits the data better than the rust alpert model does furthermore the authors demonstrate that network executives can improve ratings by using this model the authors predict that by following their scheduling strategies in particular by broadcasting comedies after 10 00 p m abc cbs and nbc could have increased their average ratings by 12 9 7 5

the effects of unions on organisational change and employment this paper investigates the association between unionism organizational change and employment using british data over 1980 84 union plants were more likely to have experienced organizational change this is likely to be due to both the once for all removal of restrictive practices and union voice effects the oft cited negative relationship between unionism and employment growth may well arise from the differential extent to which restrictive practices were removed in union plants during 1980 84 more importantly the authors present evidence suggesting that unions were associated with faster employment growth during the late 1970s copyright 1991 by royal economic society

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

inflation and relative price variability new evidence for the united states this article provides new evidence on the empirical relationship between inflation and relative prices in the united states in line with the predictions of recent monetary search models we find that the impact of expected inflation on relative price variability rpv has disappeared during the recent period when inflation expectations have been stabilized on a low level endogenous break point tests are applied to identify the timing and to confirm the significance of the changing role of inflation for rpv the empirical findings are robust with respect to different price indices disaggregation levels and measurement concepts

dynamic price competition in auto insurance brokerage we analyze brazilian data on auto insurance and document that a about 20 of policies are sold without brokerage commission b over 40 are sold at the highest fee allowed and c the remaining contracts are associated with a spread out distribution of fees static models cannot rationalize these findings we develop a dynamic model of price competition with search and switching costs that reproduces them we use the equilibrium structure to estimate the model parameters and infer the brokers expected earnings the frequency that insurees switch brokers and the counterfactual effects of a price ceiling policy

price dispersion and inflation evidence from israel the paper considers the question whether observed price differentials reflect perceived differences in quality service agreements or location or whether information imperfections can explain this phenomenon it sets out theoretical arguments linking inflation to reductions in the information stock held by agents and thus to greater price dispersion the hypothesis is tested using monthly price data for 13 uniquely defined goods sold in israel between 1971 and 1984 price dispersion is shown to be positively related to the rate of market price inflation since inflation is an unlikely proxy for changes in perceived characteristics the findings support price dispersion theories based on optimally imperfect decision making

job search stigma effect and escape rate from unemployment this article formulates job search models incorporating certain types of the stigma effect of unemployment it is assumed that the probability of getting a job offer given the unemployment individual contacts the firm is influenced by the duration of unemployment and is justified in a signaling context the optimal search is analyzed for one sector as well as across several independent labor market segments it is shown that there are reasonably general conditions on the search environments for which both the individual reservation wage and escape rate are negative duration dependent a fact observed in empirical studies

inflation targeting and relative price variability what difference does inflation targeting make author affiliation chi young choi cychoi uta eduyoung se kim acknowledgment the authors are grateful to coeditor kent kimbrough and two anonymous referees for constructive comments that helped to improve this article the authors also wish to thank steve cecchetti kang liu shin ichi nishiyama margie tieslau taka tsuruga and the seminar participants at the academia sinica national chung cheng university national sun yat sen university national taiwan university texas tech university and the university of texas at arlington for helpful comments and vikas kakkar for providing cpi data for hong kong any remaining errors are the authors 1 introductionvariability in relative prices is known to be a major channel through which inflation can induce welfare costs by impeding an efficient allocation of resources in the economy consequently substantial effort has been devoted in the literature to examining the link between relative price variability rpv and aggregate inflation although much of the existing theoretical and empirical literature points to a positive monotonic relationship newer contributions suggest that the relationship between inflation and rpv is more complicated particularly in terms of its sensitivity to the inflation regime 1the primary purpose of this study is to investigate whether the connection between inflation and rpv is influenced in an important way by the monetary policy framework chosen by a central bank specifically this article focuses on exploring whether the adoption of an inflation targeting it framework exerts any significant impact on rpv as measured by the standard deviations of sectoral inflation rates relative to the aggregate rate since it was first implemented in new zealand more than two decades ago the popularity of it has spread with some twenty five countries worldwide implementing the framework to date freedman and laxton 2009 the literature is now replete with studies pointing to reductions in both the level and the volatility of inflation in countries that have adopted it e g mishkin and schmidt hebbel 2007 2 while studies of the impact of it on aggregate inflation performance are plentiful little attention has been paid to the impact of it on rpv the question of whether and indeed how it affects rpv is an important one for several reasons first exploring the potential connection between it and rpv is a worthwhile exercise given the popularity of it as a monetary framework and the centrality of rpv to the current generation of macromodels the importance of rpv is recognized in standard new keynesian dynamic stochastic general equilibrium dsge models where the variance of relative prices is viewed as a useful summary statistic as noted by amano ambler and rebei 2007 for example in dsge models the optimal rate of target inflation and the optimal variability of inflation relative to output depend on the quantitative effects of price dispersion on macroeconomic equilibrium second answering the question helps us identify the driving force behind the change in rpv distinguishing between it adoption itself and its subsequent impact on inflation if the relationship is monotonically positive as is often believed in the literature one should expect that it adoption would bring about a decline in rpv in the same way as it has led to a decline in inflation if the relationship is more complex however the effect of it adoption on reducing rpv may hinge on the change in inflation regimes after it adoption third our answer to the question also sheds additional light on the empirical evidence for the relative effectiveness of it across different stages of development while there is strong evidence that developing countries benefit more from it than industrial countries in combating inflation and its volatility e g petursson 2004 lin and ye 2009 we are aware of no empirical research that has assessed this issue with respect to rpv

unions rent creators or extractors this paper proposes a model of workplace specific unions that integrates two views of what unions do one view holds that unions mainly engage in rent extraction another view holds that unions mainly engage in rent creation by providing agency services that increase workplace productivity we demonstrate that the choice between the two activities is systematically related to the economic and regulatory environment in which the union operates product market competition encourages rent creation while labor market deregulation encourages rent extraction moreover we provide a rationale for why firms may want to subsidize unions the editors of the scandinavian journal of economics 2005

inertia and variety seeking in a model of brand purchase timing previous research on state dependence indicates that a brand s purchase probabilities vary over time and depend on the levels of inertia and variety seeking and on the identity of the previously purchased brand brand choice probabilities obtained from models such as the logit and the probit are however fixed over time conditional on the previous brand purchased and on the levels of marketing variables consequently state dependence has largely been studied as a time invariant phenomenon in brand choice models with the levels of inertia and variety seeking assumed to be constant over time to account for the time varying nature of state dependence would require a model in which brand switching probabilities depend upon interpurchase times one modeling framework that can account for this dependence is based on the hazard function approach the proposed approach works as follows all other factors being equal an inertial household purchasing a brand on a particular occasion is most likely to repurchase that brand on the next occasion if the household switches it will be to a brand located perceptually close in attribute space to the previously purchased brand in other words an inertial household has the highest switching hazard for the same origin and destination brands with a progressively lower hazard rate for brands perceptually located farther and farther away from the origin brand the amount by which the hazard is lowered depends upon the perceptual distance and the inertia level of the household on the other hand if the household is variety seeking the most likely brand purchased would be a brand located farthest away from the previously purchased brand in attribute space in other words the hazard rate of repurchase is the lowest with the rate increasing with the distance of the destination brand from the origin brand and the level of that household s variety seeking tendency the effects of inertia and variety seeking are therefore incorporated at the attribute level into a brand purchase timing model in doing so we attempt to provide greater insight into the nature of state dependence in models of purchase timing our model and estimation procedure will enable us to distinguish between households that are inertial and those that are variety prone in addition to accounting for state dependence the model also accounts for the effects of unobserved heterogeneity among households in their brand preferences and in their sensitivities to marketing activities a majority of studies in marketing using the hazard function approach to investigate purchase timing have not accounted for heterogeneity in marketing mix effects the study integrates recent methods that incorporate the effects of inertia and variety seeking in brand choice models with a semi markov model of purchase timing and brand switching the proposed model enables us to 1 infer market structure via a perceptual map for the sample households and 2 investigate implications for the introduction of a line extension we provide empirical applications of the proposed method using three different household level scanner panel data sets we find that differing levels of inertia and variety seeking characterize the three data sets the findings are consistent with prior beliefs regarding these categories in addition our results indicate that the nature of interbrand purchase timing behavior depends upon the extent of inertia or variety seeking in the data we are also able to characterize the structure of the three product markets studied this provides implications for interbrand rivalry in the market further we demonstrate how the model and results can be used to predict the location of a line extension in the perceptual space of households finally we obtain implications for the timing of brand promotions

relative price variability and inflation in europe the relationship between inflation and the relative variability of prices has been the subject of careful investigation in the united states using data for product groups at the city level yet in europe where the relationship could have profound effects on the viability of monetary integration no attempt has been made to study the relationship this paper fills the gap by examining data disaggregated to the commodity level across 10 eu countries evidence is found for logistic smooth transitions in the relative price variability measures within countries and within product groups when this deterministic component is removed the stochastic element is not persistent and does not always have the positive relationship with inflation commonly found in us city data

sectoral variability and the foundations of optimal inflation rate abstractthe recent monetary search models argue that the real effects of inflation on economic activity can be gauged through relative price variability rpv our study uses a large panel data of

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

inflation price dispersion and market integration through the lens of a monetary search model monetary search theory implies 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 results in an optimal inflation rate above zero for highly integrated markets with low search costs however the impact of inflation on price dispersion should only be small using price data of the european union member states this paper is the first that tests and confirms these predictions of monetary search theory

identifying the hand of past distinguishing state dependence from heterogeneity a basic problem in social science is to ascertain the importance of initial endowments on subsequent outcomes of a dynamic process interest in this topic centers on two distinct issues a do initial endowments have a temporally persistent effect on outcomes i e is there heterogeneity b are the effects of initial endowments attenuated or accentuated by subsequent experiences of the process being studied or by related processes i e is there state dependence these two questions show up in a variety of contexts 1 the importance of family background on a person s subsequent education and earnings is a hotly debated topic do market or nonmarket mechanisms reinforce or diminish initial endowments 2 the incidence of criminal activity is concentrated among a small population of repeated offenders are certain persons prone to criminality or does crime breed crime 3 are persons who experience unemployment more likely to experience future unemployment due to loss of work experience or market stigma 4 does early entry into an industry confer an advantage of incumbency or does it merely proxy the basic managerial and innovative ability of early entrants many formal models of state dependent processes or processes with persistent effects of initial conditions have been formulated invariance of steady states to initial endowments was viewed as a desirable feature of an economic model in the 1960 s and 1970 s path dependent synergism and nonergodicity are fashionable features of models today is the choice between models with long run dependence on initial conditions and those without solely a matter of intellectual esthetics can data discriminate between these two classes of models how many economically extraneous statistical regularity conditions have to be imposed in order to distinguish between these models how many and what kind of maintained assumptions are required in order to let the data speak on these important questions in this paper i focus on one nonergodic model that receives much attention in the literature the model of duration dependence and heterogeneity discussed by herbert silcock 1954 and also examined by tony lancaster 1979 chris elbers and geert ridder 1982 myself and burton singer 1984 and myself and bo honore 1989

economies of scale household size and the demand for food household scale economies are plausibly attributed to shared household public goods that make larger households better off at the same level of per capita resources larger households should therefore have higher per capita consumption of private goods such as food provided that they do not substitute too much toward the effectively cheaper public goods the evidence shows exactly the opposite data from rich and poor countries indicate that at constant per capita total expenditure the per capita demand for food decreases with household size and that it does so most in the poorest countries where substitution should be the least

unions and investment in british industry this paper presents an empirical analysis of investment in british industry using data at the industry level and focusing on union effects the authors find that the rate of investment is around 28 percent lower in firms that recognize unions and have an average union density relative to those in which unions are not recognized this is the gross effect holding wages product prices and productivity constant if we take account of union effects on these as well the overall effect is an investment reduction of 16 percent in competitive firms and 3 percent in noncompetitive firms copyright 1992 by royal economic society

paying attention or paying too much in medicare part d we study whether people became less likely to switch medicare prescription drug plans pdps due to more options and more time in part d panel data for a random 20 percent sample of enrollees from 2006 2010 show that 50 percent were not in their original pdps by 2010 individuals switched pdps in response to higher costs of their status quo plans saving them money contrary to choice overload larger choice sets increased switching unless the additional plans were relatively expensive neither switching overall nor responsiveness to costs declined over time and above minimum spending in 2010 remained below the 2006 and 2007 levels

tenure dependence in consumer firm relationships an empirical analysis of consumer departures from automobile insurance firms a typical pattern in markets featuring long term consumer firm relationships is for departure probabilities to decline with tenure a crucial question is whether this actually implies increasing consumer preference for firms if so firms should actively try to convince consumers to remain through the early periods of the relationship and should enter new markets quickly however the pattern can also be explained by selection on unobserved heterogeneity the challenge is to use the data available in these markets generally details on the consumers of one firm to distinguish between these explanations i rely on individual price histories in auto insurance findings include an economically relevant level of both relationship effects and heterogeneity but a much more important role for heterogeneity

is there any asymmetry in the effect of inflation on relative price variability abstract it is widely perceived that relative prices are more dispersed in periods of price decreases than in periods of price increases we show that the asymmetry results from misspecifying the true u shaped underlying model with a piecewise linear regression model

inflation fixed cost of price adjustment and measurement of relative price variability theory and evidence in an interesting paper julio rotemberg 1983 extends the works of eitan sheshinski and yoram weiss 1977 and michael mussa 1981 to examine the aggregate consequences of monetary growth in an economy in which sellers incur a fixed cost of price adjustment the fixed cost prevents a continual adjustment of individual prices so each seller keeps his price constant in periods of discrete length increasing his price in discrete jumps at the end of these periods a central feature of the inflationary process is therefore that relative prices become dispersed around their means and the theory predicts that even a fully anticipated inflation increases the variability of relative prices the empirical evidence on this point does however appear to be mixed on the one hand richard parks 1978 and stanley fischer 1981a b 1982 conclude that anticipated inflation does increase relative price variability which fischer interprets as providing empirical support for the theory on the other hand mario blejer 1981 1983 and blejer and leonardo leiderman 1982 find that anticipated inflation has no effect or only a very weak effect on relative price variability which makes john taylor 1981 doubt the quantitative significance of the theory 2 this paper uses rotemberg s theoretical framework to demonstrate that the proxy for relative price variability adopted in the empirical literature does not properly capture the relative price variability that is caused by a fixed cost of price adjustment the methodology of the above cited studies is therefore not appropriate for evaluating the empirical relevance of the fixed cost theory and the divergence of their results is not surprising specifically the proxy which consists of the variance of the rates of price change between successive observations does not always increase with the anticipated inflation even with disaggregate data 3 the proxy decreases with the anticipated inflation in approximately half of any interval of inflation rates for which a seller adjusts his price no more than a given number of times between successive observations moreover the relationship between the anticipated inflation and the proxy depends on such extraneous factors as the timing of the observations a change in the timing may change a positive relationship between the anticipated inflation and the proxy to a negative one and vice versa the paper also proposes alternative more satisfactory measures of relative price variability and provides empirical support for the theoretical conclusions

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

inflation and relative price variability in the short and long run new evidence from the united states this paper presents new evidence that a positive association exists between inflation and relative prices and relative inflation rates in very disaggregated data for the united states over the period 1975 through 1992 there is also evidence that the response of relative prices and relative inflation rates to inflation varies inversely with the information content of a given shock to inflation the relationship is studied from two cross sectional perspectives using individual price series collected from forty eight u s cities evidence on the persistence of the effects of inflation on relative prices is also presented results here demonstrate the absence of a long run relationship between inflation and relative price dispersion i e the two series are not cointegrated finally results from vector autoregressions further imply the effect is smaller than indicated by typical estimates copyright 1996 by ohio state university press

on the asymmetric u shaped relationship between inflation inflation uncertainty and relative price skewness in the uk we investigate the asymmetric relationships between aggregate inflation and the second and third moments of the cross sectional distribution of relative prices using a modified calvo pricing model with regime dependent price rigidities calibration experiments reveal that the inflation standard deviation and inflation skewness relationships exhibit u shaped asymmetries around the historical mean inflation rate uk sectoral data support our results we conclude that monetary policy should target an inflation rate proximate to the common minima of these nonlinear relationships and that core inflation measures should not be used for policy purposes as they exclude much of the information contained in the higher moments

relative price variability and inflation a disaggregated analysis relative price variability has been studied at the cross sectional intermarket level this paper addresses the equally important phenomenon of intramarket variability the dispersion of commodity price movements around the industry average using quarterly price data for 80 disaggregated commodity groups in the united kingdom from 1974 to 1984 the paper investigates the determinants of intramarket price variability and replicates some previous crosssectional tests for the united kingdom intermarket price variability is found to be positively related to inflation which confirms previous results for the united states and other countries intramarket variability is found to be positively related to the average market rate of price change but the strength of this relationship appears to be inversely related to the level of industry concentration these results generally support the propositions and findings reported by stigler and kindahl

services as experience goods an empirical examination of consumer learning in automobile insurance accurate is information at initial purchase how rapidly do consumers learn from product experiences and how much impact does learning have on purchase decisions i answer these questions for the case of automobile insurance using a panel of 18 595 consumers from one firm my principal findings are patterns of consumer departures following claims point to learning consumers enter the firm overly optimistic about its quality and are generally disappointed by experience and the impact of learning is mitigated by the slow arrival of claims and the development of lock in jel d12 d83 g22 l15

productivity and trade unions in british manufacturing industry 1973 85 this paper uses panel data on british manufacturing industries between 1973 and 1985 to examine the relationship between productivity and labour organization it is shown that the relationship between unions and productivity levels is sensitive to the econometric specification the evidence points to there being no relationship in the 1970s when unions were more popular and a negative relationship from 1979 onwards we also find evidence that industrial concentration is associated with higher levels of productivity and this accounts for more of the productivity recovery after the recession in the early 1980s than the impact of trade unions the recession itself is shown to have had an impact on subsequent productivity growth we also suggest that the long run gains in productivity caused by the shakeout of 1980 81 may not have compensated for the loss in output at the time

on the stubbornness of sticky prices this paper presents a simple menu cost example in which there is a clear distinction between price stickiness and downward rigidity of prices while price stickiness may or may not exist in menu cost models downward rigidity shows up whenever there is a reduction of the expected rate of inflation this reduction changes the optimal target and threshold for each firm for some it also implies an immediate increase of their own price this upward jump of prices in case of a disinflationary attempt is interpreted as downward rigidity since there are no symmetric forces when expected inflation increases copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

inflation inflation uncertainty and relative price variability this paper tests three models that predict a relationship between the variability of relative price changes rpv and aspects of inflation such as expected inflation unexpected inflation and inflation uncertainty these are respectively the menu costs model the lucas barro signal extraction model and the hercowitz cukierman extension of the lucas barro model that allows for different price elasticities of supply across markets the results imply rejection of the hypothesis that any one of the models entirely explains the relationship between inflation and rpv and also imply rejection of the hypothesis that the three models together jointly explain the relationship

optimality of the friedman rule in economies with distorting taxes abstract we find conditions for the friedman rule to be optimal in three standard monetary models our main contribution is to shed light on two issues in the literature first the conventional view maintains that when money is a final good its services should be taxed moreover if money demand is interest inelastic its services should be taxed heavily we show that this view is incorrect second there is an ongoing controversy about whether the optimality of the friedman rule is connected to the intermediate goods result from public finance we resolve this controversy by showing a deep connection between these results

unemployment dynamics and duration dependence a major issue in the analysis of unemployment durations concerns distinguishing genuine duration dependence of the exit rate out of unemployment from unobserved heterogeneity we present a method for the nonparametric estimation of both phenomena designed to be applicable to time series data on aggregate outflows from different duration classes the model explicitly takes into account that individual exit rates are affected by the business cycle and by seasonal effects the method is applied to u s data we find diverging duration effects among black and white individuals however except for white males duration dependence is dominated by unobserved heterogeneity

price controls and the variability of relative prices recent literature that explains relative price variability within a partial inforrnation multimarkets framework typically assumes that prices in all markets are deterrnined by market clearing 1 however in many countries a certain number of prices is either directly set by the government or regulated by it in israel for example the government is directly involved in setting the prices of some basic foodstuffs fuels electricity public transportation and a number of other items 2 adjustments in the prices of these goods are made at discrete intervals and are widely and instantaneously disseminated by the media as a result individuals in all markets have up to date inforrnation on that component of the general price level which is set by the government in terrns of the islands paradigm this means that the component of the general price level which is confused with relative price movements is smaller than the same component in an economy in which all prices are freely deterrnined by the market the purpose of this article is to explore the implications of this modified inforrnation structure for relative price variability within a partial inforrnation framework