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A Consistent Characterization of a Near-Century of Price Behavior

Listed author(s):
  • Gordon, Robert J

This paper demonstrates that the commonly used Expectational Phillips Curve (EPC) framework cannot explain the last eighty-seven years of aggregate price behavior in the United States. The EPC explanation, which in its most general form relates price change to expected inflation and the level of detrended output, obscures the fact that price change has been much more closely related to the contemporaneous rate of change of detrended output. Over the near-century of annual data studied here, a change in output has shown a remarkably consistent tendency to be associated in annual data with a simultaneous change in the price level of about one-half as much. Stated another way, nominal GNP changes have been divided consistently, with two-thirds taking the form of output change and the remaining one-third the form of price change. This finding applies not only over the entire 1890-1978sample period, but also over three subperiods (1890-1929, 1929-53, and 1953-78).

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 70 (1980)
Issue (Month): 2 (May)
Pages: 243-249

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Handle: RePEc:aea:aecrev:v:70:y:1980:i:2:p:243-49
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  1. Klein, Benjamin, 1976. "The social costs of the recent inflation: The mirage of steady "anticipated" inflation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 3(1), pages 185-212, January.
  2. Sargent, Thomas J, 1971. "A Note on the 'Accelerationist' Controversy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(3), pages 721-725, August.
  3. Feige, Edgar L & Pearce, Douglas K, 1976. "Economically Rational Expectations: Are Innovations in the Rate of Inflation Independent of Innovations in Measures of Monetary and Fiscal Policy?," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 499-522, June.
  4. Brunner, Karl & Meltzer, Allan H., 1976. "Institutional arrangements and the inflation problem," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 3(1), pages 1-13, January.
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