Product Prices and the OECD Cycle

Jaume Ventura and Aart Kraay ()

No 3019, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It is well known that business cycles in OECD countries exhibit a remarkable degree of synchronization. Much less known is that the peak of the OECD cycle is associated with high prices of labour-intensive products and low prices of capital-intensive ones. We document this cyclical behaviour of product prices and argue that it offers an important clue as to why business cycles are so synchronized. Positive shocks in one or more countries raise the prices of labour-intensive products and, as a result, the demand for labour throughout the industrialized world. This generates increases in wages, employment and output in all industrial countries. Through this channel, shocks are positively transmitted across countries, creating a force towards the synchronization of business cycles.

Keywords: Oecd cycle; International transmission of shocks; Commodity trade (search for similar items in EconPapers)
JEL-codes: E30 F10 F40 (search for similar items in EconPapers)
Date: 2001-10
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Product Prices and the OECD Cycle (2002)
Working Paper: Product Prices and the OECD Cycle (2000)
Working Paper: Product Prices and the OECD Cycle (1999)
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