Product Prices and the OECD Cycle / Aart Kraay, Jaume Ventura.

Format:

Book

Author/Creator:

Kraay, Aart.

Contributor:

National Bureau of Economic Research.

Ventura, Jaume.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7788.

NBER working paper series no. w7788

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

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 behavior 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.

Notes:

Print version record

July 2000.