Output and Inflation Co-movement : An Update on Business-Cycle Stylized Facts

Author/Editor:

Michal Andrle ; Jan Bruha ; Serhat Solmaz

Publication Date:

December 13, 2016

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

What are the drivers of business cycle fluctuations? And how many are there? By documenting strong and predictable co-movement of real variables during the business cycle in a sample of advanced economies, we argue that most business cycle fluctuations are driven by one major factor. The positive co-movement of real output and inflation convincingly argues for a demand story. We propose a simple statistic that can compare data and models. Based on this statistic, we show that the recent vintage of structural economic models has difficulties replicating the stylized facts we document.

Series:

Working Paper No. 16/241

Subject:

English

Publication Date:

December 13, 2016

ISBN/ISSN:

9781475560329/1018-5941

Stock No:

WPIEA2016241

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

37

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