Abstract
Abstract One potential real effect of inflation is its influence on the dispersion of relative prices in the economy which affects economic efficiency and aggregate output. Using a novel data set for the US and UK and a VARMA asymmetric bivariate GARCH-M model of inflation and relative price dispersion, we test for the effects of inflation and inflation uncertainty on relative price dispersion. We obtain two main results: First, inflation affects relative price dispersion positively in the US supporting the menu costs model and negatively in the UK supporting the monetary search model. Second, there is no evidence for the role of inflation uncertainty in explaining relative price dispersion, either for the US or the UK. Relative Preisunterschiede und Inflation: Evidenz fur Grosbritannien und die Vereinigten Staaten Zusammenfassung Ein potentieller realwirtschaftlicher Effekt von Inflation ist ihr Einfluss auf die Verteilung der relativen Preise in einer Volkswirtschaft. Dies beeinflusst wiederum die okono...
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