Inflation, inflation uncertainty, and relative price dispersion: Evidence from bivariate GARCH-M models

• 成果类型: Article
• 署名作者: Grier, KB; Perry, MJ
• 署名单位: University of Michigan System; University of Michigan; University of Michigan Flint
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(96)01280-9
• 发表日期: 1996
• 页码: 391-405
• 关键词: relative price dispersion; inflation; inflation uncertainty; GARCH

摘要

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.