The Comovements between Real Activity and Prices in the G7 / Wouter J. Den Haan, Steven Sumner.

Format:

Book

Author/Creator:

Haan, Wouter J. Den.

Contributor:

National Bureau of Economic Research.

Steven, .

Series:

Working Paper Series (National Bureau of Economic Research) no. w8195.

NBER working paper series no. w8195

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

In this paper, we study the short-run and long-run comovement between prices and real activity in the G7 countries during the postwar period using VAR forecast errors and frequency domain filters. We find that there are several patterns of the correlation coefficients that are the same in all countries. In particular, the correlation at the 'long-run' horizon is virtually always negative and the correlation at the 'short-run' horizon is typically substantially higher. Although there is evidence of positive 'short-run' correlations for some countries it is not very robust to the choice of the price and output variables. In addition, we propose a more efficient method to calculate the covariances of VAR forecast errors and - in contrast to claims made in the literature - we show that band-pass filters isolate the desired set of frequencies not only when the series are stationary but also when they are first or second-order integrated processes.

Notes:

Print version record

March 2001.