TY  - JOUR
AU  - Gordon,Robert J.
TI  - A Consistent Characterization of a Near-Century of Price Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 455
PY  - 1980
Y2  - February 1980
UR  - http://www.nber.org/papers/w0455
L1  - http://www.nber.org/papers/w0455.pdf
N1  - Author contact info:
Robert J. Gordon
Department of Economics
Northwestern University
Evanston,  IL 60208-2600
Tel: 847/491-3616
Fax: 847/869-7343
E-Mail: rjg@northwestern.edu
AB  - This paper demonstrates that the commonly used Expectational Phillips Curve (EPC) framework cannot explain the last eighty-seven years of aggregate price behavior in the United States. The EPC explanation, which in its most general form relates price change to expected inflation and the level of detrended output, obscures the fact that price change has been much more closely related to the contemporaneous rate of change of detrended output. Over the near-century of annual data studied here, a change in output has shown a remarkably consistent tendency to be associated in annual data with a simultaneous change in the price level of about one-half as much. Stated another way, nominal GNP changes have been divided consistently, with two-thirds taking the form of output change and the remaining one-third the form of price change. This finding applies not only over the entire 1890-1978sample period, but also over three subperiods (1890-1929, 1929-53, and 1953-78).
ER  -