INFLATION AND PRICE WAGE DISPERSIONS IN JAPAN

By using postwar Japanese data, this paper examines how inflation rates were correlated with three types of variabilities: relative price variability, inflationary expectations variability, and relative wage variability. As in the United States, inflation rates were positively correlated with relative price variability and inflationary expectations variability in Japan. However, contrary to the results in the United States, the correlation between relative wage variability and (the variance of) inflation rate was positive in Japan. Furthermore, we cannot support the natural rate hypothesis in explaining any cross-sectional variabilities. The oil shocks hypothesis explains the relative price variabilities of WPI very well but does not explain other types of variabilities. © 1991.