Price Controls, Hyperinflation, and the Inflation–Relative Price Variability Relationship
Rolf Lüders; Rodrigo Cerda y Álvaro Silva
Empirical Economics, forthcoming
Abstract: Chile established between 1970 and 1973 a fixed-price policy for many products eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes and a hyperinflationary environment. We do so using unique monthly data for 23 food products between January 1970 and May 1982. We construct different relative price variability measures and consistently find that the sensitivity of relative price variability to inflation is larger when there is price-fixing.
JEL: E31, E64, E65, N16.