Economics at your fingertips  

Price Prediction Errors and Real Activity: A Reassessment

Jo Gray and David Spencer

Economic Inquiry, 1990, vol. 28, issue 4, 658-81

Abstract: Rational expectations, natural-rate macro-models in which aggregate demand disturbances affect the real sector through price prediction errors, while powerful and tractable analytical tools, are often perceived to be of questionable empirical relevance. This paper reexamines the empirical role of price prediction errors in determining the level of real aggregate activity. The approach is distinguished by accounting for aggregate supply-side disturbances and by more careful treatment of natural rates. Contrary to some previous studies, the authors find considerable empirical support for the hypothesis that demand-driven price level surprises are positively and significantly correlated with aggregate real economic activity. Copyright 1990 by Oxford University Press.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2020-06-21
Handle: RePEc:oup:ecinqu:v:28:y:1990:i:4:p:658-81