Inflation and relative price variability: short-run vs. long-run

This paper uses recent developments in measuring correlation to examine the relationship between inflation and relative price variability (RPV). The results suggest that the positive correlation holds not only in the short ran but also in the long run. This finding has important implications for theoretical models that purport to explain this relationship: such models must incorporate features that generate positive relationships that hold even in the long ran. (C) 2003 Elsevier B.V. All rights reserved.