A further interpretation of Friedman’s hypothesis: the cointegration of component CPI indexes

This study extends the Friedman (1977) [Friedman, M., 1977. Nobel lecture: inflation and unemployment, Journal of Economic Dynamics and Control 12, 231–254] hypothesis regarding inflation means and variances to show that high inflation is also associated with greater divergence of component inflation indexes over time. This finding follows Friedman’s reasoning involving inflation uncertainty and time-lagged adjustments.