Price controls, hyperinflation, and the inflation–relative price variability relationship

Chile established between 1970 and 1973 a fixed price policy for many products that was eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes an...

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Bibliographic Details
Published in:Empirical economics 2021-10, Vol.61 (4), p.1725-1748
Main Authors: Cerda, Rodrigo, Silva, Alvaro, Lüders, Rolf
Format: Article
Language:English
Subjects:
Econometrics
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Hyperinflation
Inflation
Insurance
Management
Pricing policies
Statistics for Business
Variability
Wage & price controls
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Summary:Chile established between 1970 and 1973 a fixed price policy for many products that was eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes and a hyperinflationary environment. We do so using unique monthly data for 23 food products between January 1970 and May 1982. We construct different relative price variability measures and consistently find that the sensitivity of relative price variability to inflation is larger when there is price-fixing.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-020-01953-w