Inflation and Relative-Price Variability: The Effect of Commodity Aggregation

Posted: 25 Sep 2014

See all articles by Rajeev K. Goel

Rajeev K. Goel

Illinois State University - Department of Economics

Rati Ram

Illinois State University - Department of Economics

Date Written: September 23, 2014

Abstract

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.

Keywords: inflation, relative-price variability, commodity aggregation

JEL Classification: E3

Suggested Citation

Goel, Rajeev K. and Ram, Rati, Inflation and Relative-Price Variability: The Effect of Commodity Aggregation (September 23, 2014). Applied Economics, Vol. 25, No. 5, 1993, Available at SSRN: https://ssrn.com/abstract=2500016

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

Rati Ram

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States
309-438-7101 (Phone)
309-438-5228 (Fax)

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