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The Pre‐ and Postwar Price‐Output Paradox Revisited

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  • Jason E. Taylor
  • Jinill Kim

Abstract

This article addresses past findings of a change in the sign of the price‐output correlation in the pre‐ and post‐World War II eras. This “paradox” can be resolved by taking into account the changing direction of price movements, deflation to inflation, during the two time periods. There is, in fact, a consistently negative correlation between the absolute value of price level changes and changes in output in both time periods and throughout the entire sample. This finding offers empirical support to economic theories espousing the benefits of price stability.

Suggested Citation

  • Jason E. Taylor & Jinill Kim, 2004. "The Pre‐ and Postwar Price‐Output Paradox Revisited," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 163-169, July.
    • Handle: RePEc:wly:soecon:v:71:y:2004:i:1:p:163-169
    DOI: 10.1002/j.2325-8012.2004.tb00631.x
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    References listed on IDEAS

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    7. Gomme, Paul, 1993. "Money and growth revisited : Measuring the costs of inflation in an endogenous growth model," Journal of Monetary Economics, Elsevier, vol. 32(1), pages 51-77, August.
    8. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126, National Bureau of Economic Research, Inc.
    9. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    10. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, September.
    11. C Freedman, 2001. "Inflation Targeting And The Economy: Lessons From Canada'S First Decade," Contemporary Economic Policy, Western Economic Association International, vol. 19(1), pages 2-19, January.
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    Cited by:

    1. Marco Gallegati & Meghnad Desai, 2024. "Stagflation and inflationary regimes: Long cycles in historical perspective," Journal of Evolutionary Economics, Springer, vol. 34(4), pages 709-737, December.

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