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Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects
[report]
2005
unpublished
Preserved Fulltext
Sudden Stops are associated with increased volatility in relative prices. We introduce a model based on information acquisition to rationalize this increased volatility. An empirical analysis of the conditional variance of the wholesale price to consumer price ratio using panel ARCH techniques confirms the relevance of Sudden Stops and potential balance sheet effects as key determinants of relative price volatility, where balance sheet effects are captured by the interaction of a proxy for
doi:10.3386/w11492
fatcat:5syxwhq5xjfileylcu2m5qs7dm