Inflation, price dispersion and market integration through the lens of a monetary search model
Year: 2010
Type: preprint
Abstract: Recent monetary search models emphasize that the real effects of inflation via its impact on price dispersion depend on the level of search costs and, thus, on the level of market integration. For less integrated markets, the inflation-price dispersion nexus is predicted to be asymmetrically V-shaped which implies an optimal inflation rate above zero. For highly integrated markets, however, theory suggests that the impact of inflation on price dispersion disappears. Employing price data of the European Union member states, this paper is the first that empirically tests these implications of monetary search theory.
Authors: Becker, Sascha, Nautz, Dieter
Institution: Freie Universität Berlin
Language: English
Domain: Social Sciences
Open Access status: green
Funder: Deutsche Forschungsgemeinschaft
Award: G3534402753
OpenAlex ID: W2159394262