The time-varying correlation between output and prices in the United States over 1800 to 2014

Nikos Antonakakis, Rangan Gupta, Aviral K. Tiwari

    Research output: Contribution to journalArticlepeer-review

    194 Downloads (Pure)

    Abstract

    In this study, we examine the time-varying correlations between output and prices, while controlling for the impact of monetary policy stance, and output and inflation uncertainties over the period of 1800-2014. The results of the empirical analysis reveal that dynamic correlations of output and prices were typically negative, suggesting a countercyclical behaviour of prices, apart from the early 1840s, and from the beginning till the mid of the 20th century, wherein correlation were positive, indicating the procyclicality of prices. A historical decomposition analysis based on a sign-restricted structural vector autoregressive model is able to relate the procyclical and countercyclical behavior to the predominance of aggregate supply, and aggregate demand and/or monetary policy shocks, respectively. Moreover, inflation uncertainty (monetary policy stance) was found to have a positive (negative) effect on inflation over the last 215 years.
    Original languageEnglish
    Pages (from-to)98-108
    JournalEconomic Systems
    Volume41
    Issue number1
    Early online date27 Nov 2016
    DOIs
    Publication statusPublished - Mar 2017

    Keywords

    • WNU
    • Conditional correlation
    • GARCH
    • Price-Output Comovement
    • US Economy

    Fingerprint

    Dive into the research topics of 'The time-varying correlation between output and prices in the United States over 1800 to 2014'. Together they form a unique fingerprint.

    Cite this