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The Comovements Between Real Activity and Prices at Different Business Cycle Frequencies


  • Wouter J. Den Haan


In this paper, I present two different methods that can be used to obtain a concise set of descriptive results about the comovement of variables. The statistics are easy to interpret and capture important information about the dynamics in the system that would be lost if one focused only on the unconditional correlation coefficient of detrended data. The methods do not require assumptions about the order of integration. That is, the methods can be used for stationary as well as integrated processes. They do not require the types of assumptions needed for VAR decompositions either. Both methods give similar results. In the postwar period, the comovement between output and prices is positive in the During the same period, the comovement between hours and real wages is negative in the that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain the empirical results, while standard sticky-price models with only demand shocks cannot.

Suggested Citation

  • Wouter J. Den Haan, 1996. "The Comovements Between Real Activity and Prices at Different Business Cycle Frequencies," NBER Working Papers 5553, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5553
    Note: EFG

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    References listed on IDEAS

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    Cited by:

    1. Christopher J. Erceg, 1997. "Nominal wage rigidities and the propagation of monetary disturbances," International Finance Discussion Papers 590, Board of Governors of the Federal Reserve System (U.S.).
    2. Paul Fenton & Alain Paquet, 1997. "International Interest Rate Differentials: The Interaction with Fiscal and Monetary Variables, and the Business Cycle," Cahiers de recherche CREFE / CREFE Working Papers 56, CREFE, Université du Québec à Montréal, revised Jan 1998.
    3. Charles A. Fleischman, 1999. "The causes of business cycles and the cyclicality of real wages," Finance and Economics Discussion Series 1999-53, Board of Governors of the Federal Reserve System (U.S.).
    4. Junhee Lee & Joonhyuk Song, 2009. "Nature of Oil Price Shocks and Monetary Policy," NBER Working Papers 15306, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access


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