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Are Prices Countercyclical? Evidence From the G-7

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  • Eswar Prasad
  • Bankim Chadha

Abstract

This paper re-examines the cyclical behavior of prices using postwar quarterly data for the G-7. We confirm recent evidence that the price level is countercyclical. However, we find strong evidence that the inflation rate is procyclical in our sample. Our results show the importance of making a clear distinction between inflation and the cyclical component of the price level when reporting and interpreting stylized facts regarding business cycles.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/91.

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Length: 28
Date of creation: 01 Aug 1994
Date of revision:
Handle: RePEc:imf:imfwpa:94/91

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Cited by:
  1. Gregory D. Hess & Kwanho Shin, 1995. "Intranational business cycles in the United States," Research Working Paper, Federal Reserve Bank of Kansas City 95-07, Federal Reserve Bank of Kansas City.
  2. Michael R. Pakko, 1997. "The cyclical relationship between output and prices: an analysis in the frequency domain," Working Papers, Federal Reserve Bank of St. Louis 1997-007, Federal Reserve Bank of St. Louis.
  3. Smant, David J. C., 1998. "Modelling trends, expectations and the cyclical behaviour of prices," Economic Modelling, Elsevier, Elsevier, vol. 15(1), pages 151-161, January.
  4. Sandra Martina Leitner, 2007. "The Austrian Business Cycle - A Characterization," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2007-17, Department of Economics, Johannes Kepler University Linz, Austria.
  5. Michal Andrle & Jan Bruha & Serhat Solmaz, 2013. "Inflation and Output Comovement in the Euro Area," IMF Working Papers 13/192, International Monetary Fund.
  6. Caraiani, Petre, 2012. "Stylized facts of business cycles in a transition economy in time and frequency," Economic Modelling, Elsevier, Elsevier, vol. 29(6), pages 2163-2173.
  7. Michael Kiley, 2002. "The lead of output over inflation in sticky price models," Economics Bulletin, AccessEcon, vol. 5(5), pages 1-7.
  8. Asghar Shahmoradi & Ali Tayebnia & Hossein Kavand, 2011. "Business Cycle Features in the Iranian Economy," Iranian Economic Review, Economics faculty of Tehran university, Economics faculty of Tehran university, vol. 16(1), pages 74-93, winter.
  9. Bjarni G. Einarsson & Gudjón Emilsson & Svava J. Haraldsdóttir & Thórarinn G. Pétursson & Rósa B. Sveinsdóttir, 2013. "On our own? The Icelandic business cycle in an international context," Economics, Department of Economics, Central bank of Iceland wp63, Department of Economics, Central bank of Iceland.
  10. Richard De Abreu Lourenco & Philip Lowe, 1994. "Demand Shocks, Inflation and the Business Cycle," RBA Research Discussion Papers, Reserve Bank of Australia rdp9411, Reserve Bank of Australia.
  11. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(1), pages 3-26, February.
  12. Agnès Belaisch & Claudio Soto, 1998. "Empirical Regularities of Chilean Business Cycles," Working Papers Central Bank of Chile, Central Bank of Chile 41, Central Bank of Chile.
  13. Gatti, Domenico Delli & Gallegati, Marco & Gallegati, Mauro, 2005. "On the nature and causes of business fluctuations in Italy, 1861-2000," Explorations in Economic History, Elsevier, Elsevier, vol. 42(1), pages 81-100, January.
  14. Ivanova, Detelina & Lahiri, Kajal & Seitz, Franz, 2000. "Interest rate spreads as predictors of German inflation and business cycles," International Journal of Forecasting, Elsevier, Elsevier, vol. 16(1), pages 39-58.
  15. Joseph Haslag & William Brock, 2014. "On Understanding the Cyclical Behavior of the Price Level and Inflation," Working Papers, Department of Economics, University of Missouri 1404, Department of Economics, University of Missouri, revised 01 Jul 2014.
  16. Dean Croushore, 1998. "Low inflation: the surprise of the 1990s," Business Review, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-12.
  17. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, Elsevier, vol. 30(12), pages 2071-2088, December.
  18. repec:ebl:ecbull:v:5:y:2002:i:5:p:1-7 is not listed on IDEAS
  19. Levent, Korap, 2009. "Türkiye ekonomisinde enflasyon ve reel milli gelir arasındaki çevrimsellik ilişkisi üzerine bir inceleme
    [An investigation upon the cyclical relationship between inflation and real income in t
    ," MPRA Paper 20266, University Library of Munich, Germany.

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