What is it about?
The correlation between the price index and output gap has become much less negative, nearly close to zero, over the last two decades for the U.S. However, no substantial change was observed for the other major G7 economies. The study is aimed to determine what has caused the sudden shift in the U.S. price cyclicality.
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Why is it important?
We have observed that the sudden change in the U.S. price cyclicality is partially explained by the structural changes in its labor productivity's cyclical property.
Perspectives
We conclude that the two behavioral and institutional changes have led U.S. prices to move a-cyclically in the post-1984 period.
Prof. Gyun Cheol Gu
Kyonggi University
Read the Original
This page is a summary of: Why Have U.S. Prices Become Independent of Business Cycles?, Metroeconomica, June 2015, Wiley,
DOI: 10.1111/meca.12086.
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