The historical connection between short term output and prices in a small open economy

Ola Grytten (ola.grytten@nhh.no) and John Hunnes

No 2009/21, Working Paper from Norges Bank

Abstract: According to a Keynesian view, short term output fluctuations are normally demand side led. Since prices reflect demand, they should mirror output fluctuations. Thus, prices and output are expected to move in the same direction in the short run. The present paper investigates the historical co-movements of output and prices for a small open raw material based economy, in this case Norway 1830-2006. We find little evidence of a positive relationship. On the contrary, we rather find negative correlations between the two variables, indicating that supply side shocks through the foreign sector were more important for historical business cycles in Norway than assumed hitherto.

Keywords: Business cycles; Output; Small open economy; Price fluctuations. (search for similar items in EconPapers)
JEL-codes: E31 E32 N10 N13 N14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-10-29
New Economics Papers: this item is included in nep-cba, nep-ene, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2009_21

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