Inflation and Price Dispersion: An Analysis of Micro Data

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Abstract
I use large data sets on prices by products and stores rfom recent inflationary periods in Israel to study the relationship between inflation and the variability of the levels of relative prices. I find no clear relationship between inflation and the variance of relative prices in spite of the strong positive relationship between inflation and the unconditional variance of the rates of nominal price change across stores. 1 use an identity to explain this apparent contradiction.
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