Degrees of Processing and Changes in the Cyclical Behavior of Prices in the United States, 1869-1990
Posted: 30 Dec 1998
Price indices for periods before the Second World War place more weight on less-processed products than do their post-war counterparts, to an extent that exaggerates the change over time in the composition of aggregate output. Prices of less-processed products are especially procyclical in levels and inflation rates. Thus, comparisons between historical and post-war series can give biased measures of changes in the cyclical behavior of the aggregate price level. Also, changes in the behavior of the aggregate price level must be distinguished from changes in the behavior of prices of given products, subject to a given degree of processing.
JEL Classification: E31, E32, N11, N12
Suggested Citation: Suggested Citation