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Title:Inflation, price dispersion and market integration through the lens of a monetary search model PDF Logo
Authors:Becker, Sascha S.
Nautz, Dieter
Issue Date:2010
Series/Report no.:SFB 649 discussion paper 2010-058
Abstract:Monetary search theory implies 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 results in an optimal inflation rate above zero. For highly integrated markets with low search costs, however, the impact of inflation on price dispersion should only be small. Using price data of the European Union member states, this paper is the first that tests and confirms these predictions of monetary search theory.
Subjects:inflation
relative price variability
monetary search
market integration.
JEL:C23
D40
E31
F40
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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