Faculty Publications

Inflation And Real Sectoral Output Shares: Dynamic Panel Model Evidence From Seven Oecd Countries

Document Type

Article

Keywords

Costs of inflation, Misallocation of resources, Relative-price variability, Sectoral output shares

Journal/Book/Conference Title

Journal of Macroeconomics

Volume

33

Issue

4

First Page

607

Last Page

619

Abstract

Models of the cost of inflation often conclude that inflation misallocates resources. For example, inflation may lead to an increase in the variability of relative prices and it is often claimed that this increase in variability leads to a misallocation of resources. This claim raises the following empirical question, does inflation alter the composition of real output; that is, does it change real output shares? We examine this question using dynamic panel data methods for nine sector panels each with seven OECD countries from 1970 to 2005. We find evidence that inflation changes the real shares of some sectors even when inflation is treated as endogenous. © 2011 Elsevier Inc.

Department

Department of Economics

Original Publication Date

12-1-2011

DOI of published version

10.1016/j.jmacro.2011.06.002

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