Why Have U.S. Prices Become Independent of Business Cycles?
Gyun Cheol Gu ()
Metroeconomica, 2015, vol. 66, issue 4, 661-685
type="main"> This article analyzes the issue of price cyclicality from a Post Keynesian perspective. It shows that there are two key factors at the center of the mechanism for the sudden U.S. transition from counter-cyclical to a-cyclical price movement in the early 1980s. First, the cost pass-through policy has been changed to ensure that the cyclical changes of input prices and/or labor productivity are absorbed more thoroughly and are thus reflected more frequently in profit markups than occurred prior to 1984. This relatively increased adaptability of the profit markups in the aggregate sense between the pricing periods cushions the direct effect of cyclical changes in the cost base on price cyclicality. Second, a structural change in the U.S. labor productivity's cyclical property has generated cost-base stability during the post-1984 period. Declines in hiring and firing costs and cutbacks in social security benefits have led the labor discipline effect to dominate the labor hoarding effect. This has allowed labor productivity to increase as the unemployment rate rises; thus, the cost base cyclicality has weakened, and prices have become less cyclical since 1984.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:metroe:v:66:y:2015:i:4:p:661-685
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0026-1386
Access Statistics for this article
Metroeconomica is currently edited by Heinz D. Kurz and Neri Salvadori
More articles in Metroeconomica from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().