Improvements in Macroeconomic Stability: The Role of Wages and Prices
AbstractThis paper compares macroeconomic performance in the United States from 1891 through 1914 with the period after the Second World War by estimating reduced form autoregressions for prices, wages and output, by looking at their moving average representations, and by giving them simple structural interpretations. The results show that the impulses to the economic system were smaller in the later period, but the propagation mechanisms are much slower and more drawn out. The smaller shocks are therefore translated into larger and more prolonged fluctuations in output and inflation than would occur if the earlier dynamics were applicable in the later period. A tentative explanation for the changes in the dynamics is a slower speed of wage and price adjustment combined with a different accommodative stance for the monetary system.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1491.
Date of creation: Mar 1988
Date of revision:
Publication status: published as John B. Taylor. "Improvements in Macroeconomic Stability: The Role of Wages and Prices," in Robert J. Gordon, ed., "The American Business Cycle: Continuity and Change" University of Chicago Press (1986)
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- John B. Taylor, 1986. "Improvements in Macroeconomic Stability: The Role of Wages and Prices," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 639-678 National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Taylor, John B., 1980. "Output and price stability: An international comparison," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 109-132, May.
- Victor Zarnowitz, 1989. "Cost and Price Movements in Business Cycle Theories and Experience: Causes and Effects of OBserved Changes (SEE ALSO WP3131-Send out together)," NBER Working Papers 3132, National Bureau of Economic Research, Inc.
- John Hassler & Petter Lundvik & Torsten Persson & Paul Soderlind, 1992. "The Swedish business cycle: stylized facts over 130 years," Discussion Paper / Institute for Empirical Macroeconomics 63, Federal Reserve Bank of Minneapolis.
- Ellis, Christopher J. & Holden, Steinar, 1997.
"Optimal contract length in a reputational model of monetary policy,"
European Economic Review,
Elsevier, vol. 41(2), pages 227-243, February.
- Ellis, C.J. & Holden, S., 1992. "Optimal Contract Length in a Reputational Model of Monetary Policy," Memorandum 11/1992, Oslo University, Department of Economics.
- Neville Francis & Valerie A. Ramey, 2004.
"The Source of Historical Economic Fluctuations: An Analysis using Long-Run Restrictions,"
NBER Working Papers
10631, National Bureau of Economic Research, Inc.
- Neville Francis & Valerie A. Ramey, 2006. "The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions," NBER Chapters, in: NBER International Seminar on Macroeconomics 2004, pages 17-73 National Bureau of Economic Research, Inc.
- Steven G. Allen, 1991.
"Changes in the Cyclical Sensitivity of Wages in the United States, 1891-1987,"
NBER Working Papers
3854, National Bureau of Economic Research, Inc.
- Allen, Steven G, 1992. "Changes in the Cyclical Sensitivity of Wages in the United States, 1891-1987," American Economic Review, American Economic Association, vol. 82(1), pages 122-40, March.
- Joseph E. Gagnon, 1989. "A forward-looking multicountry model: MX3," International Finance Discussion Papers 359, Board of Governors of the Federal Reserve System (U.S.).
- Kearney, Colm & Daly, Kevin, 1997. "Monetary volatility and real output volatility: An empirical model of the financial transmission mechanism in Australia," International Review of Financial Analysis, Elsevier, vol. 6(2), pages 77-95.
- Edward Nelson, 2008. "Friedman and Taylor on monetary policy rules: a comparison," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 95-116.
- Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
- Nathan S. Balke & Robert J. Gordon, 1986. "The Estimation of Prewar GNP Volatility, 1869-1938," NBER Working Papers 1999, National Bureau of Economic Research, Inc.
- Magda Kandil, 2002. "Asymmetry In Economic Fluctuations In The Us Economy: The Pre-War And The 1946-1991 Periods Compared," International Economic Journal, Taylor & Francis Journals, vol. 16(1), pages 21-42.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.