English, Article, Journal or magazine article edition: Nominal rigidities, relative prices and skewness Mª Ángeles Caraballo Pou; Carlos Dabús

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Nominal rigidities, relative prices and skewness
Author
  • Mª Ángeles Caraballo Pou
  • Carlos Dabús
Physical Description
  • preprint
Notes
  • The menu costs model developed by Ball and Mankiw (BM)(1994,1995) predicts that inflation is positively related to the skewness of price changes distribution. We test this prediction in different inflationary contexts: Spain (1975-2002) and Argentina (1960-1989). We find a positive inflation-skewness relationship in both countries at low inflation, even though the mean annual inflation rates were very different: 2,2% for Spain and 23% for Argentina. Therefore, the threshold of low inflation under which the menu costs model is suitable is determined endogenously, and it depends on the inflationary experience of each economy. In the higher inflation periods skewness is not significant. Finally, our results suggest that the menu-costs model is not suitable beyond certain threshold of inflation.
  • menu costs, skewness, relative prices, inflation regimes
  • RePEc:cea:doctra:e2005_17
Language
  • English
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