The Cyclical Behavior of Prices PDF Download

Author: Geoffrey Hoyt Moore
Publisher:
ISBN:
Category : Price indexes
Languages : en
Pages : 50

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Author: Thomas F. Cooley
Publisher:
ISBN:
Category :
Languages : en
Pages : 24

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Author: Geoffrey Hoyt Moore
Publisher:
ISBN:
Category :
Languages : en
Pages : 48

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Author: John P. Judd
Publisher:
ISBN:
Category :
Languages : en
Pages : 20

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Author: Julio Rotemberg
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 128

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Because inputs are scarce, marginal cost should be an increasing function of output. Without changes in this real marginal cost schedule, aggregate output can vary if and only if the markup of price over marginal cost varies. In this review, we discuss the extent to which observed fluctuations in aggregate economic activity depend upon such variations in average markups. We first study whether, empirically, real marginal cost rises in cyclical expansions. Average real labor cost is not very procyclical, but, for reasons such as overhead labor and adjustment costs, marginal labor cost should be more procyclical. Measures of marginal cost based on materials costs and inventories also appear procyclical. We next show that countercyclical markup variation may, depending upon how costs are modeled, account for a substantial fraction of cyclical output movements. We also show that the observed procyclical variations in productivity and profits are consistent with the hypothesis that cyclical variations in output are primarily due to markup variations than to shifts in the real marginal cost schedule. Finally, we survey theories of endogenous markup variation. These include both models of sticky and models in which firms' desired markup varies over time.

Author: Mark Joseph Bils
Publisher:
ISBN:
Category :
Languages : en
Pages : 278

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Author: Xue Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 128

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This paper documents business cycle facts of prices and the inflation rate for the United States from 1959:Q1 to 2013:Q3. Prices are countercyclical and the inflation rate is procyclical. In addition, prices lead the overall cycle by two quarters and the inflation rate lags the overall cycle by three quarters. To account for the observed cyclical behavior, two models are applied and extended including a business cycle model with endogenous money supply (Freeman and Huffman 1991) and a DSGE model with sticky prices (Ireland 2003). The former model only generates countercyclical prices but not procyclical inflation or the phase shift of prices relative to the overall cycle. For the latter model, its sticky-price version captures all the observed cyclical facts; whereas its flexible-price version fails to capture the procyclical behavior of inflation and the phase shift of prices relative to output. Better performance of the sticky-price model indicates that nominal rigidity can account for the cyclical behavior of prices and inflation. Thus, a powerful empirical business cycle model should incorporate a reasonable degree of price stickiness.

Author: Eric P. Bettinger
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages :

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Author: Mr.Bankim Chadha
Publisher: International Monetary Fund
ISBN: 1451851472
Category : Business & Economics
Languages : en
Pages : 28

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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.

Author: Thomas Hale Pendleton
Publisher:
ISBN:
Category :
Languages : en
Pages : 178

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