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A Consistent Characterization of a Near-Century of Price Behavior.

Authors :
Gordon, Robert J.
Source :
American Economic Review; May80, Vol. 70 Issue 2, p243-249, 7p, 2 Charts
Publication Year :
1980

Abstract

The article demonstrates that the last eighty-seven years of aggregate price behavior in the United States cannot be explained by the Expectational Phillips Curve (EPC) framework. The EPC explanation makes it clear that price change has not been closely related to the present rate of change of detrended output. A singularly consistent tendency to be related in annual data with a simultaneous change in the price level of about one-half as much was shown by a change in output. With a single equation, almost a century of price behavior can be explained unlike other historical studies. There is a coefficient on the "rate-of-change effect" in the single equation. There is a significant shift in the formation of expectations after the Korean War of 1950-53 regarding the price level and its rate of change. This shift has been consistent in overall timing but it representation differs. A significant role of three-year staggered-wage contracts, a unique American institution, is also emphasized by the shift.

Details

Language :
English
ISSN :
00028282
Volume :
70
Issue :
2
Database :
Complementary Index
Journal :
American Economic Review
Publication Type :
Academic Journal
Accession number :
4511069