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Article
Relative Price Changes as Supply Shocks: Evidence from U.S. Cities
Quarterly Journal of Business and Economics (2002)
  • Hiranya K Nath, Sam Houston State University
Abstract
This paper estimates a fixed effects regression model using panel data on prices for U.S. cities to test the supply-side theory of inflation that takes the distribution of relative price changes as an aggregate supply shock. The results indicate that the positive correlation between inflation and relative price variability is a robust empirical regularity that gives some credibility to the supplyside theory of inflation. During the early 1980s this relationship, though positive, weakens which indicates predominance of monetary shocks in determining changes in the aggregate price level. On the other hand, inflation and skewness are not found to be strongly related when aggregate macroeconomic effects are controlled.
Keywords
  • Relative price variability,
  • inflation,
  • monetary shocks,
  • supply shocks
Disciplines
Publication Date
Summer 2002
Citation Information
Hiranya K Nath. "Relative Price Changes as Supply Shocks: Evidence from U.S. Cities" Quarterly Journal of Business and Economics Vol. 41 Iss. 3 & 4 (2002)
Available at: http://works.bepress.com/hiranya_nath/1/