Rejoinder

Article Abstract:

It is impossible to implement Randal J. Verbrugge's triple statistic using the weights to generate the price index. It is clear that there is no feasible way of including the weights into his analysis. Ball and Mankiw argue that there is a positive correlation between the sample mean and the skewness of inflation which indicates support for a particular economic theory. This is the main reason why the statistics are biased and it would be a surprise if there is anything but a positive sample correlation.

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Inflation and the distribution of price changes

Article Abstract:

A small-sample bias exists between inflation and its higher-order moments which can account for the correlation between inflation and the skewness of price changes. However, this correlation which has been the subject of debate between microeconomists may not be fact after all. The bias will only be present in the mean-variance correlation when the price-change distributions are asymmetrical. This observation may be true in other countries but has not been seen in US economic data.

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Interpreting the correlation between inflation and the skewness of relative prices: a comment on Bryan and Cecchetti

Article Abstract:

Bryan and Cecchetti claim that the correlation between inflation and the skewness of the price change distribution may not be fact after all because of a small-sample bias. However, the oil price increases in the 1970 refute their assertion. Inflation rose due to the large increases in the price of crude oil. Small-sample bias may not be possible at all since the government measures the prices in all sectors. The observed correlation is then based on the full population of sectors.

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