does there exist a relation between inflation and relative price change variability the effect of the aggregation level abstract the actual magnitude of relative price change variability is dependent on the level of aggregation this note demonstrates the effect of this dependence when we try to estimate a relation between inflation and relative price change variability and when we perform a decomposition analysis of this variability

further evidence on the variability of inflation and relative price variability abstract using a sample of monthly observations of both a 12 category group and a 203 category group of personal consumption expenditures we furnish evidence that relative price variability is positively related to both the inflation rate and inflation variability the relation is robust to oil price shocks

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 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

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

relative price variability inflation and the allocative efficiency of the price system abstract this paper develops a theory of the relationship between aggregate and relative price variability based on the inability of people even in a rational world to identify permanent changes in relative demands whether caused by real or by monetary variability and relative productivities as soon as they occur the theory implies that the variance of the rate of inflation and the variance of relative price change are positively related although expectations are rational and markets always clear production decisions respond sluggishly to changes in relative prices temporary shocks to relative demands cause prolonged changes in the structure of production available information is used so as to maximize the efficiency of the price system however this efficiency decreases when any of the underlying variances increases this decrease is more pronounced when the production lag is longer

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

explicating political hazards and safeguards a transaction cost politics approach we apply the logical of comparative institutional analysis to the question of the governance of the relationship between private investors and the government we consider two strategies that investors may follow lobbying for the creation of a specialized political governance structure or the reliance on more general political mechanisms to influence policy in that sector on an ongoing basis we identify political hazards as crucial determinant of the choice of political governance and the transactional attributes that give rise to such hazards finally we highlight shift parameters in a nation s institutional environment that influence the choice between specialized and generalized political governance mechanisms

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

a note on the variability of inflation and the dispersion of relative price changes abstract the relationship between the variance of inflation and the variability of relative price changes is analyzed empirically a strong positive association is found for 1948 1969 and 1948 1975 application of chow s test indicates structural instability and granger s test suggests a feedback effect between these variables

the adjustment of expectations to a change in regime a study of the founding of the federal reserve the founding of the federal reserve system in 1914 led to a substantial change in the behavior of nominal interest rates the authors examine the timing of this change and the speed with which it was effected they then use data on the term structure of interest rates to determine how expectations responded their results indicate that the change in policy regime was rapid and that individuals quickly understood the new environment they were facing copyright 1987 by american economic association

the puzzling price behavior of treasury bills that mature at the turn of calendar months abstract this paper documents the unusual price behavior of treasury bills that mature at the turn of calendar months there is a kink in the yield curve as it crosses calendar months and this kink is most pronounced as the yield curve crosses between calendar years potential seasonality in the spot rate of interest could not explain these results nor could they be explained by the mispricing of either the last bill or first bill in a month the exceptionally large premium on the first bill in a month tended to be earned throughout the lifetime of the bill

relative prices and inflation new evidence from different inflationary contexts this paper analyses the relationship between inflation and relative price variability in the direction of the latter in two countries with very different inflationary experiences argentina and spain to address this objective using disaggregated price indexes the wholesale price index for argentina and the consumer price index for spain we delimitate different inflationary regimes and compute a set of regressions for each country our results suggest evidence in favour of the non neutrality of inflation mostly in hyperinflation periods and do not support either the menu costs or the signal extraction approaches we also detect significant structural changes in the relationship depending on the inflationary regime

measuring cpi s reliability the stochastic approach to index numbers revisited the reliability measurement of the consumer price index cpi has recently drawn much attention as the index number has been criticized for its inaccuracy in accessing the degree of inflation this article centers on providing a new regression specification that can help better gauge the cpi s reliability more specifically based on the stochastic approach to index numbers we argue that the conventional treatment of the systematic changes in relative prices should be made time variant we therefore propose a more comprehensive regression specification by including additional dummies that represent different general inflation rate levels and business cycle phases under this framework we are more capable of avoiding possible misspecifications in the regression equation as was experienced by clements and izan 1987 it also allows us to better answer the keynes critic regarding the stochastic approach to index numbers the empirical results of australia and the us are used to validate the merit of

what drives the fomc s dot plots abstract the federal open market committee fomc releases quarterly its members views about what federal funds rate will be appropriate at the end of the current and the next two or three years and in the longer run we construct constant horizon interest rate projections one two and three years ahead and use real time data on 32 important macroeconomic time series to study how these variables impact on the fomc s interest rate setting news regarding the labour market is particularly important at all horizons at longer horizons financial market trade and output news also matter

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

perspectives on positive political economy this volume serves as an introduction to the field of positive political economy and the economic and political processes with which it is concerned this new research tradition is distinct from both normative and historical approaches to political economy grounded in the rational actor methodology of microeconomics positive political economy is the study of rational decisions in a context of political and economic institutions more analytical than traditional approaches it is concerned with the derivation of principles and propositions against which real world experience may be compared its focus is on empirical regularities and its goal is theoretical explanation the field has focused on three main areas of research models of collective action constraints on competitive market processes and the analysis of transaction costs developments in all of these areas are covered in the book the first part of the volume surveys the field while the second part displays positive political economy at work examining a variety of subjects the final part contains essays by leading political economists on the theoretical foundations of the field

inflation and relative price variability the effect of commodity aggregation using quarterly us data for 1948 89 we study the effect of the level of commodity aggregation on the relation between inflation and relative price variability the effect is assessed for the full period and the subperiods 1948 73 and 1974 89 the relationship is investigated for actual inflation as well as its expected and unexpected components although the parameter estimates show sizeable differences across the two aggregation levels the qualitative picture is the same for both levels in all cases one of the by products of the exercise is the observation that unexpected inflation shows a much stronger positive covariation with relative price variability than the expected component

high and variable inflation further evidence on the friedman hypothesis abstract this study employing a garch model finds a positive and significant relationship between the level and variability of inflation this provides evidence in support of friedman s friedman 1977 view that high inflation leads to more variable inflation

the effects of expected and unexpected inflation on the variability of relative prices abstract we estimate the effects of expected and unexpected inflation on relative price variability expected inflation is prominent in explaining price variability within a market whereas unexpected inflation becomes more important when that variability is between different markets