Do Prices Reflect Short-Term Output Fluctuations? Empirical Evidence from a Small Open Raw Material Based Economy

30 Pages Posted: 19 Feb 2010

See all articles by John A. Hunnes

John A. Hunnes

University of Agder - School of Business and Law

Ola Honningdal Grytten

Institutt for samfunnsøkonomi / Department of Economics Norges Handelshøyskole / Norwegian School of Economics

Date Written: January 2009

Abstract

Within the framework of Keynesian economic theory it is widely taken for granted that short term output fluctuations are mirrored in corresponding fluctuations in prices. By examining data on prices and output for a small open raw material based economy, in this case Norway, 1830-2006, this paper concludes that there isn't a clear positive correlation between prices and output. Contrary, there is more evidence of a counter-cyclical relationship, indicating that business cycles are more frequently caused by supply-side shocks than demand side shocks. However, negative demand shocks normally seem to cause lagged negative price responses.

Suggested Citation

Hunnes, John Arngrim and Grytten, Ola Honningdal, Do Prices Reflect Short-Term Output Fluctuations? Empirical Evidence from a Small Open Raw Material Based Economy (January 2009). NHH Dept. of Economics Discussion Paper No. 1/2009. Available at SSRN: https://ssrn.com/abstract=1554384 or http://dx.doi.org/10.2139/ssrn.1554384

John Arngrim Hunnes

University of Agder - School of Business and Law ( email )

Norway
47 38 14 15 14 (Phone)

HOME PAGE: http://sites.google.com/site/ahunnes/

Ola Honningdal Grytten (Contact Author)

Institutt for samfunnsøkonomi / Department of Economics Norges Handelshøyskole / Norwegian School of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

Register to save articles to
your library

Register

Paper statistics

Downloads
23
Abstract Views
289
PlumX Metrics