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

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Abstract

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.

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Authors and Affiliations

  1. Institut für empirische Wirtschaftsforschung der Universität Zürich, Zollikerstr. 137, CH-8008, Zürich

    M. J. Granziol

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  1. M. J. Granziol
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This paper has benefitted from the comments of a number of individuals. Particular thanks are due to Larry Christiano, John Huizinga and John Hand from the University of Chicago, Heinz Müller and Heidi Schelbert from the University of Zurich, and an anonymous referee. The author takes full responsibility for remaining erros. Computational assistence by Duri Schmidt is acknowledged.

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Granziol, M.J. General price level instability and the variability of relative prices in Switzerland. Empirical Economics 9, 1–13 (1984). https://doi.org/10.1007/BF01972173

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  • DOI: https://doi.org/10.1007/BF01972173

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