Relative Price Distortions and Inflation Persistence

Macroeconomic implications of relative price distortions: Seigniorage, output and welfare∗

We compare macroeconomic models of sticky-prices (Calvo and Costsof-adjustment) with flexible price models in terms of optimal seigniorage. This sheds light on the importance of relative price distortions. Sticky-price models with no price dispersion terms have unattractive implications, we argue, when it comes to the derivation of optimal policies. We provide examples where they may imply very...

Cross-Sectional Relative Price Variability and Inflation in Turkey: Time Varying Estimation

Abstract This study investigates the empirical validity of the variability hypothesis in Turkey for the period of February 2005-November 2015, by using cross-sectional relative price data and by focusing on the assumptions of linearity and stability. The linearity assumption between the two variables is ensured by estimating quadratic regression equation. The assumption of stability is secur...

Inflation And Relative Price Dispersion: Evidence For Iran

The Distortionary Effects of Inflation: An Empirical Investigation

In a wide class of monetary models with both cash and credit goods, the main welfare cost of inflation is that it distorts the choice between these two goods. In these models, distortions exist because the relevant measure of the relative price between cash and credit goods for consumers is the usual relative price discounted by the nominal interest rate. Changes in the inflation rate therefore...

Price stickiness , inflation , and persistence in real exchange rate fluctuations : cross - country results *

Models that emphasize sticky prices to explain persistent real exchange rate fluctuations predict that such fluctuations should be less persistent in high inflation countries relative to low inflation countries. Cross-country regression results, in general, do not support this implication.  2001 Elsevier Science B.V. All rights reserved.