Stylized facts and regime changes: Are prices procyclical?
J MONETARY ECON
497 - 526.
We investigate empirically the stability of the correlation between output growth and inflation using a technique that allows for changes in regime. We look at recent quarterly data for the G4 and at historical data for the U.S. and U.K. We find evidence of changes both in means and variances in both sources of data. In the quarterly data we find that the covariance between output growth and inflation is typically negative. In the historical data we find, as suggested in previous studies, that inflation was procyclical especially in the inter-war years, but has been countercyclical in the post-war period.
|Title:||Stylized facts and regime changes: Are prices procyclical?|
|Keywords:||growth and inflation, regime switching, countercyclical prices, BUSINESS CYCLES, CYCLICAL BEHAVIOR|
|UCL classification:||UCL > School of Arts and Social Sciences|
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