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Do "Shortages" Cause Inflation?

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Author Info
Owen Lamont
Abstract

I count the number of times per month that the word `shortage' appears on the front page of The Wall Street Journal and The New York Times for the period 1969-1994. Using this as a general measure of shortages in the US economy, I test whether shortages help predict inflation. Using a variety of different specifications, I find that this time-series measure of shortages strongly predicts inflation, and contains information not captured by commodity prices, monetary aggregates, interest rates, and other proposed predictors of inflation. This suggests that disequilibrium was an important part of the adjustment of prices to macroeconomic shocks during this period.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5402.

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Date of creation: Dec 1995
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Handle: RePEc:nbr:nberwo:5402

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data

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  14. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
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