The Comovement between Real Activity and Prices in the G7
Tinbergen Institute Discussion Paper No. TI 2002-092/2
18 Pages Posted: 31 Mar 2003
Date Written: August 2002
Abstract
In this paper, we study the short-run and long-run comovement between prices and real activity in the G7 countries during the postwar period using VAR forecast errors and frequency domain filters. We find several patterns of the correlation coefficients that are robust across countries and time periods; typically, the correlation coefficients at long-run horizons are significantly negative and the correlation coefficients at short-run horizons are substantially higher. Additionally, there is evidence of positive correlation at short-run forecast horizons for some countries.
Keywords: comovement, vector autoregressive models
JEL Classification: E31, E37
Suggested Citation: Suggested Citation
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