The cyclical behaviour of prices in the U.K.: Some structural time series evidence

Imad A. Moosa ()
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Imad A. Moosa: Department of Economics and Finance, La Trobe University, Bundoora, Victoria 3083, Australia

Empirical Economics, 2000, vol. 25, issue 2, 278 pages

Abstract: The cyclical behaviour of prices in the U.K. is investigated using a sample of annual observations covering the period 1886-1993. A structural time series model relating consumer prices to output is estimated over four sub-periods. The results indicate that prices were procyclical in the inter-war period, countercyclical in the post-1973 period and acyclical otherwise. The proposition that the cyclical behaviour of prices is determined by the dominance of supply or demand shocks alone is disputed on the basis of empirical evidence and theoretical reasoning. It is concluded that the cyclical behaviour of prices cannot be explained just by analysing time series on output and prices and that due attention should be paid to the institutional and policy changes occurring during the period under study. It is demonstrated that the empirical results are consistent with the events experienced by the U.K. economy in the most recent period.

Keywords: Business cycle; structural time series models; supply and demand shocks (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 (search for similar items in EconPapers)
Date: 2000-05-24
Note: received: November 1998/final version accepted: October 1999
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Citations: View citations in EconPapers (2)

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