Output and inflation in the long run
Abstract
Cross-country regressions explaining output growth often obtain a negative effect from inflation. However, that result is not robust, due to the selection of countries in sample, temporal aggregation, and omission of consequential variables in levels. This paper demonstrates some implications of these mis-specifications, both analytically and empirically. In particular, for most G-7 countries, annual time series of inflation and the log-level of output are cointegrated, thus rejecting the existence of a long-run relation between output growth and inflation. Typically, output and inflation are positively related in these cointegrating relationships: a price markup model helps to interpret this surprising feature. Copyright © 2001 John Wiley & Sons, Ltd.Download Info
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 16 (2001)
Issue (Month): 3 ()
Pages: 241-253
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Keywords:Other versions of this item:
- Neil R. Ericsson & John S. Irons & Ralph W. Tryon, 2000. "Output and inflation in the long run," International Finance Discussion Papers 687, Board of Governors of the Federal Reserve System (U.S.).
- Neil R. Ericsson & John S. Irons & Ralph W. Tryon, 2000. "Output and Inflation in the Long Run," Amherst Economic Papers 2000.01, Amherst College, Department of Economics, revised 24 Oct 2000.
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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