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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.

Suggested Citation

  • Christina D. Romer, 1996. "Inflation and the Growth Rate of Output," NBER Working Papers 5575, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5575
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    References listed on IDEAS

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    1. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-1171, September.
    2. Robert E. Hall & N. Gregory Mankiw, 1994. "Nominal Income Targeting," NBER Chapters, in: Monetary Policy, pages 71-94, National Bureau of Economic Research, Inc.
    3. 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.
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    Cited by:

    1. Ulf Söderström, 2002. "Monetary Policy with Uncertain Parameters," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 125-145, March.
    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. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, September.
    4. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    5. Ian McDonald, 2009. "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. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    7. 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.
    8. Asli GUNAY & Kivilcim METIN-OZCAN & Umit OZLALE, 2001. "Measuring the Probability of Crises in the Turkish Economy," Middle East and North Africa 330400032, EcoMod.
    9. Brian O'Reilly, 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.
    10. Łukasz Arendt, 2005. "Próba oszacowania NAIRU dla Polski," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 1-23.
    11. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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