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Bagehot for beginners: The making of lending of last resort operations in the mid-19th century

  • Vincent Bignon

    (Graduate Institute, Geneva)

  • Marc Flandreau

    (Graduate Institute, Geneva and CEPR, London)

  • Stefano Ugolini

    (Graduate Institute, Geneva)

According to a Keynesian view, short term output fluctuations are normally demand side led. Since prices reflect demand, they should mirror output fluctuations. Thus, prices and output are expected to move in the same direction in the short run. The present paper investigates the historical co-movements of output and prices for a small open raw material based economy, in this case Norway 1830-2006. We find little evidence of a positive relationship. On the contrary, we rather find negative correlations between the two variables, indicating that supply side shocks through the foreign sector were more important for historical business cycles in Norway than assumed hitherto.

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Paper provided by Norges Bank in its series Working Paper with number 2009/22.

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Length: 38 pages
Date of creation: 05 Oct 2009
Date of revision:
Handle: RePEc:bno:worpap:2009_22
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