We analyze the manipulation of inflation statistics that occurred in Argentina starting in 2007 to test the relevance of informational frictions in price setting. We estimate that the manipulation of statistics was associated with a higher degree of price dispersion. This effect is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices. Reporting inaccurate measures of the CPI entails significant welfare losses, especially in economies with volatile monetary policy.
- Informational frictions
- Price setting
- Social value of public information
ASJC Scopus subject areas
- Economics and Econometrics