Inflation and Relative Price Variability in the Short and Long Run: New Evidence from the United States

JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28 No. 3, August 1996

Posted: 16 Sep 1996

See all articles by David C. Parsley

David C. Parsley

Vanderbilt University – Finance and Economics

Abstract

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.

JEL Classification: E30, E31

Suggested Citation

Parsley, David C., Inflation and Relative Price Variability in the Short and Long Run: New Evidence from the United States. JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28 No. 3, August 1996, Available at SSRN: https://ssrn.com/abstract=3321

David C. Parsley (Contact Author)

Vanderbilt University – Finance and Economics ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-0649 (Phone)
615-343-7177 (Fax)

HOME PAGE: https://business.vanderbilt.edu/bio/david-parsley/

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
712
PlumX Metrics