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- Title
THE CYCLICAL BEHAVIOR OF PRICES AND RELATIVE PRICES.
- Authors
DAVIS, GEORGE K.; KANAGO, BRYCE E.
- Abstract
Price and output shock correlations provide information concerning macroeconomic shocks. Previous research generally finds small or negative correlations between real gross domestic product (GDP) and GDP deflator shocks but positive correlations between industrial production (IP) and consumer price index (CPI) shocks at short forecast horizons. We show that mismatched price and output correlations may have different magnitudes or signs than matched pairs. Matched and mismatched correlations between disaggregated prices and output from the GDP accounts indicate the procyclical price of nondurables to durables makes correlations between mismatches misleading. Thus, there is reason to be skeptical of results based on IP and the CPI. ( JEL E31, E32)
- Subjects
PRICES; PRODUCTION (Economic theory); MACROECONOMICS; GROSS domestic product; CONSUMER price indexes; INDUSTRIES; STATISTICAL correlation
- Publication
Economic Inquiry, 2008, Vol 46, Issue 4, p576
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.2007.00092.x