Do "Shortages" Cause Inflation?

28 Pages Posted: 25 May 2006 Last revised: 10 Jun 2007

See all articles by Owen A. Lamont

Owen A. Lamont

Harvard University - Department of Economics

Date Written: December 1995

Abstract

I count the number of times per month that the word `shortage' appears on the front page of The Wall Street Journal and The New York Times for the period 1969-1994. Using this as a general measure of shortages in the US economy, I test whether shortages help predict inflation. Using a variety of different specifications, I find that this time-series measure of shortages strongly predicts inflation, and contains information not captured by commodity prices, monetary aggregates, interest rates, and other proposed predictors of inflation. This suggests that disequilibrium was an important part of the adjustment of prices to macroeconomic shocks during this period.

Suggested Citation

Lamont, Owen A., Do "Shortages" Cause Inflation? (December 1995). NBER Working Paper No. w5402. Available at SSRN: https://ssrn.com/abstract=225463

Owen A. Lamont (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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