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The study investigated the connection between relative price changes and short-term inflation in the Philippines. Using disaggregated price data, they found a connection between higher relative price variability and periods of strong inflation or deflation. Additionally, a positively skewed price change distribution, with some prices rising more than others, was linked to increasing inflation. The tails of the price distribution, or shocks to certain prices, can influence overall inflation in some situations. This provides insight into why short-term inflation has become less responsive to demand pressures.

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Mary Joyce Caco
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40 views

RRL

The study investigated the connection between relative price changes and short-term inflation in the Philippines. Using disaggregated price data, they found a connection between higher relative price variability and periods of strong inflation or deflation. Additionally, a positively skewed price change distribution, with some prices rising more than others, was linked to increasing inflation. The tails of the price distribution, or shocks to certain prices, can influence overall inflation in some situations. This provides insight into why short-term inflation has become less responsive to demand pressures.

Uploaded by

Mary Joyce Caco
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Inflation is treated differently from changes in relative prices according to classical economic

theory. The level of prices is determined by shifts in the total amount of money in circulation.
Real variables such as shifts in supply and demand for various items are examples of the kinds
of things that might cause fluctuations in relative prices. Therefore, according to the hypothesis,
changes in actual prices should not influence overall inflation.
The study conducted by Basilio and Cacnio (2019) investigated the connection between the
relative price change distribution and the country's short-run inflation rate in the Philippines. In
order to establish if the higher moments of the distribution of price movements give information
on the adjustments and permanence of aggregate domestic pricing circumstances,
disaggregated price data were used in the research project.
According to the results of the study, there is a connection between relative price variability and
short-run inflation in the Philippines. Higher levels of price shift variability are often connected
with times of strong inflation and, to a lesser degree, deflationary occurrences. In addition to
this, the skewness of the distribution of price changes was shown to have a positive relationship
with changes in inflation. A positively skewed distribution shows that certain commodities are
experiencing higher price increases compared to others and that they are placing upward
pressure on the overall level of prices. This is the case during times of increasing inflation. The
tails or shocks to the prices of the various commodities and services may be identified, and
under certain situations, they can have a considerable influence on total inflation. In a similar
vein, the upper moments of the price distribution may be able to provide some insight into the
observed reduction in the degree to which short-run inflation is sensitive to changes in demand
pressures.

Reference:
https://www.bis.org/publ/bppdf/bispap111_k.pdf

The suggestions of the economic reforms that were carried out in the 1980s to produce
sustainable economic growth and development included the proposal that the Ghana Stock
Exchange (GSE) be established. It has been observed that after a number of years of
experimentation with heavy state intervention in the economy, a consensus emerged that the
achievement of a more dynamic economic growth required a greater role for the private sector
and stock markets, because they are good levers for boosting private sector access to finance.
This observation was made after a number of years of experimentation with heavy state
intervention in the economy. This always denotes that the expansion and long-term viability of
the stock market are of significance to the federal government, financial institutions, and private
investors.
The study conducted by Kwofie and Ansah (2018) in which they investigated the impact of
changes in the exchange rate and inflation on stock market returns in Ghana. The research
utilized monthly inflation and exchange rate data obtained from the Bank of Ghana, as well as
monthly market returns computed from the GSE all-share index, for the period of time spanning
from January 2000 to December 2013. In order to investigate this impact, the autoregressive
distributed lag (ARDL) cointegration approach and the error correction parametrization of the
ARDL model were used. The ARDL and the error correction model that corresponds to it were
used in the process of determining the long-run and short-run link between market returns on
the Ghana Stock Exchange (GSE), inflation, and the exchange rate.
The findings of the research indicated that there is, over the course of a lengthy period of time, a
significant correlation between the returns on GSE markets and inflation. On the other hand,
there was not a significant association between them in the short term. The findings also
revealed a significant link, both in the long run and the short run, between the returns on GSE
markets and the currency rate. The variables in question were examined to see whether or not
they had a long memory, and it was found that such a characteristic did, in fact, exist in these
variables. As a result, having a long memory is a desired attribute that investors may make use
of. This is because inflation and exchange rates have been shown to have a long-term effect on
the returns of the stock market.

Reference:
https://downloads.hindawi.com/journals/ijmms/2018/7016792.pdf

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