Inflation and Price Dispersion: An Analysis of Micro Data

01/08/1994 |  Eden Beni

Abstract

I use large data sets on prices by products and stores from recent inflationary periods in Israel to

study the relationship between inflation and the variability of the levels of relative prices. I find no

clear relationship between inflation and the variance of relative prices in spite of the strong positive

relationship between inflation and the unconditional variance of the rates of nominal price change

across stores. I use an identity to explain this apparent contradiction.



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