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Inflation and the Growth Rate of Output

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  • Christina D. Romer

Abstract

This paper shows that inflation has depended strongly on the growth rate of output for most of the twentieth century. Only in recent years has the deviation of output from trend become the predominant determinant of price behavior. The paper also shows that the growth rate effect works primarily through materials prices, and that the declining importance of materials can explain why the growth rate effect has weakened over time. Finally, the paper shows that the growth rate effect can explain why prices rose in the mid- and late- 1930s despite the fact that output was substantially below trend.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5575.

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Date of creation: May 1996
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Handle: RePEc:nbr:nberwo:5575

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References

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  1. Robert J. Gordon & James A. Wilcox, 1978. "Monetarist Interpretations of the Great Depression: An Evaluation and Critique," NBER Working Papers 0300, National Bureau of Economic Research, Inc.
  2. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-71, September.
  3. Hall, R.E. & Mankiw, N.G., 1993. "Nominal Income Targeting," Harvard Institute of Economic Research Working Papers 1650, Harvard - Institute of Economic Research.
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Cited by:
  1. Robert J. Gordon, 1997. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
  2. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
  3. Söderström, Ulf, 2000. "Monetary policy with uncertain parameters," Working Paper Series 0013, European Central Bank.
  4. Higo, Masahiro & Nakada, Sachiko-Kuroda, 1999. "What Determines the Relation between the Output Gap and Inflation ? An International Comparison of Inflation Expectations and Staggered Wage Adjustment," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 129-155, December.
  5. Ian McDonald, 2008. "Behavioural Macroeconomics And Wage And Price Setting: Developing Some Early Insights Of John Maynard Keynes And Joan Robinson," CAMA Working Papers 2009-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. O'Reilly, B., 1998. "The Benefits of Low Inflation: Taking Shock "A nickel ain't worth a dime any more" [Yogi Berra]," Technical Reports 83, Bank of Canada.

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