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The historical connection between short term output and prices in a small open economy

Author

Listed:
  • Ola Grytten

    (Norwegian School of Economics and Business Administration (NHH))

  • Arngrim Hunnes

    (University of Agder (UiA))

Abstract

According to a Keynesian view, short term output fluctuations are normally demand side led. Since prices reflect demand, they should mirror output fluctuations. Thus, prices and output are expected to move in the same direction in the short run. The present paper investigates the historical co-movements of output and prices for a small open raw material based economy, in this case Norway 1830-2006. We find little evidence of a positive relationship. On the contrary, we rather find negative correlations between the two variables, indicating that supply side shocks through the foreign sector were more important for historical business cycles in Norway than assumed hitherto.

Suggested Citation

  • Ola Grytten & Arngrim Hunnes, 2009. "The historical connection between short term output and prices in a small open economy," Working Paper 2009/21, Norges Bank.
    • Handle: RePEc:bno:worpap:2009_21
    as

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    File URL: https://www.norges-bank.no/en/news-events/news-publications/Papers/Working-Papers/2009/WP-200921/
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    References listed on IDEAS

    as
    1. Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64, Elsevier.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    5. Klovland, Jan T., 1998. "Monetary policy and business cycles in the interwar years: The Scandinavian experience," European Review of Economic History, Cambridge University Press, vol. 2(3), pages 309-344, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business cycles; Output; Small open economy; Price fluctuations.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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