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© 1998 Oxford University Press and the Foundation for the European Review of Agricultural Economics

research-article

Inflation and relative price volatility in Russian food markets*

JENS-PETER LOY**, and R. D. WEAVER***,

Department of Agricultural Economics,Christian-Albrechts-University Olshausenstrasse 40, 24098 Kiel, Germany
Pennsylvania State University, USA

Received January 1, 1998;

Summary

Real costs result when inflation changes relative prices between products or regions. When such changes are unanticipated, resource misallocation and welfare losses are induced. Time series analysis of retail food prices in Russian markets provides estimates of anticipated and unanticipated inflation, as well as of inflation uncertainty derived from a GARCH-M model. Results indicate that distortions in relative prices were induced by the anticipated inflation rate, rather than by unanticipated inflation or a measure of inflation uncertainty. No support was found for the Lucas hypothesis that a positive relationship exists between the relative price structure and the unanticipated rate of inflation.

Keywords: inflation, price volatility, food prices, market integeration, law of one price


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