Are Prices Countercyclical? Evidence From the G-7

Eswar Prasad and Bankim Chadha

No 1994/091, IMF Working Papers from International Monetary Fund

Abstract: This paper re-examines the cyclical behavior of prices using postwar quarterly data for the G-7. We confirm recent evidence that the price level is countercyclical. However, we find strong evidence that the inflation rate is procyclical in our sample. Our results show the importance of making a clear distinction between inflation and the cyclical component of the price level when reporting and interpreting stylized facts regarding business cycles.

Keywords: WP; price level; price; correlation; inflation rate; inflation-output correlation; positive correlation; HP-filtered price; price-output correlation; countercyclical price behavior; price cyclicality; aggregate price level; HP filter; HP-filtered output; Inflation; Business cycles; Unemployment rate; Cyclical unemployment; Unemployment (search for similar items in EconPapers)
Pages: 28
Date: 1994-08-01
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Citations: View citations in EconPapers (38)

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