Determinants of Relative Price Variability during a Recession: Evidence from Canada at the Time of the Great Depression
Fielding, David; Hajzler, Chris; MacGee, Jim
Cite this item:
Fielding, D., Hajzler, C., & MacGee, J. (2011). Determinants of Relative Price Variability during a Recession: Evidence from Canada at the Time of the Great Depression (Economics Discussion Papers Series No. 1107). University of Otago. Retrieved from http://hdl.handle.net/10523/1878
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/1878
Abstract:
Most studies find that relative price variability (RPV) is a U-shaped or V-shaped function of anticipated inflation, and a V-shaped function of unanticipated inflation. One exception is Reinsdorf (1994), who finds that RPV in the United States during the 1980s recession was monotonically decreasing in unanticipated inflation. We suggest a reason for this difference, and test our conjecture using data from inter-war Canada. Our results indicate that in recessionary conditions a positive inflation shock does reduce RPV. However, this reduction is unlikely to correspond to higher consumer utility; this has implications for the conduct of monetary policy during a recession.
Date:
2011-08-01
Publisher:
University of Otago
Series number:
1107
ISSN:
1178-2293
Keywords:
relative price variability; inflation; Canada; Great Depression
Research Type:
Discussion Paper
Languages:
English
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- Economics [316]
- Discussion Paper [439]