Friedman's Hypothesis and Cross-Regional Inflation Dispersion

This study shows that higher inflation is associated with increased inflation dispersion across U.S. cities and regions. Regression analysis indicates that cross-regional inflation variability is positively related to both inflation and inflation expectations based on consumer price inflation for 18 U.S. cities. Similar results are obtained after excluding five of the 18 cities that may be disproportionately impacted by energy shocks. In addition, cointegration analysis shows greater cross-regional price dispersion over time during the higher inflation period of 1978-1987 than during 1988-1997. These findings suggest that high inflation is associated with greater uncertainty for businesses and policy makers.


Issue Date:
2007
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/50156
Published in:
Review of Applied Economics, Volume 03, Number 1-2
Page range:
49-59
Total Pages:
11
JEL Codes:
E30; E31




 Record created 2017-04-01, last modified 2017-08-25

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