Variance Of Price Changes Research Articles

RELATIVE PRICE DISPERSION, AGGREGATE PRICE MOVEMENT, AND THE NATURAL RATE OF UNEMPLOYMENT

This paper develops a model of relative price stickiness and examines its implications for the relationship between relative prices, inflation, and the natural rate of unemployment. Estimation of the model demonstrates that causality in the relationship between relative and aggregate prices runs in both directions. However, microeconomic disturbances have been the primary source of relative price change variance over the postwar period, and these micro disturbances have exerted a strong effect on inflation in the short run. It also is shown that micro relative price change dispersion has had a significant influence on the natural rate of unemployment.

Some findings on relative price change variance and inflation rate uncertainty in the Canadian CPI

Some findings on relative price change variance and inflation rate uncertainty in the Canadian CPI

General price level instability and the variability of relative prices in Switzerland

The relationship between inflation and relative price change variability is studied in the context of a stochastic, rational expectation, multigood equilibrium model. The model implies a stable regression function which characterizes the relationship between the relative price change variance and the squared unexpected inflation rate. The main theoretical implications of the model are empirically tested using monthly Swiss data.

An Analysis of the Variance and Distribution of Commodity Price Changes

A method of jointly estimating the time-dependent variance of daily commodity price changes and their distribution is presented. The data are copper spot prices (1966-74) and sugar futures prices (1961-73), for London contracts. Much of the leptokurtosis observed in the price change distributions is shown to result from the mixinq of non-normal distributions whose variances differ substantially. There are important consequences for conventional autocorrelation tests, which falsely assume a constant variance. The usefulness of the logarithmic transformation of prices is assessed statistically and it is found that the transformation does help to equalise the variance of price changes.