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The Time-Varying Correlation between Output and Prices in the United States over 1800 to 2014


  • Nikolaos Antonakakis

    () (University of Portsmouth, Department of Economics and Finance, Portsmouth Business School, Portland Street, Portsmouth, PO1 3DE, United Kingdom; Webster Vienna Private University, Department of Business and Management, Praterstrasse 23, 1020, Vienna, Austria; Johannes Kepler University, Department of Economics, Altenberger Strasse 69, 4040 Linz-Auhof, Austria.)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Aviral K. Tiwari

    () (Faculty of Management, IBS Hyderabad, IFHE University, Donthanapally Shankarapalli Road, Hyderabad, Andhra Pradesh 501203, India)


In this study, we examine the time-varying correlations between output and prices, while controlling for the impact of monetary policy stance, and output and in flation uncertainties over the period of 1800-2014. The results of the empirical analysis reveal that dynamic correlations of output and prices were typically negative, suggesting a countercyclical behaviour of prices, apart from the early 1840s, and from the beginning till the mid of the 20th century wherein correlation were positive, indicating the procyclicality of prices. A historical decomposition analysis based on a sign-restricted structural vector autoregressive model is able to relate the procyclical and countercyclical behavior to the predominance of aggregate supply, and aggregate demand and/or monetary policy shocks, respectively. Moreover, infl ation uncertainty (monetary policy stance) was found to have a positive (negative) effect on in ation over the last 215 years.

Suggested Citation

  • Nikolaos Antonakakis & Rangan Gupta & Aviral K. Tiwari, 2015. "The Time-Varying Correlation between Output and Prices in the United States over 1800 to 2014," Working Papers 201584, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201584

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    More about this item


    Conditional correlation; GARCH; Price-Output Comovement; US Economy;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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