The Correlation between Shocks to Output and the Price Level: Evidence from a Multivariate GARCH Model

Abstract

Previous research indicates that the price-output correlation is time varying. This paper therefore estimates a VAR with a bivariate GARCH error process to obtain quarterly estimates of the price-output correlation for the United States for the period 1876:4-1999:4. The estimated correlation is usually positive before 1945 and zero during 1945-1963. Negative correlations become important only after 1963, but do not become obviously more important than zero correlations. Prior to 1945 the estimated correlation typically is positive during both recessions and expansions. After 1945 the estimated correlation remains largely positive during recessions, but becomes mainly negative during expansions, suggesting that changes in the sign of the price-output correlation primarily are the result of changes in its sign during expansions.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 17 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.