## Are Prices Countercyclical?

_IMF Working Papers, October 1, 1992_

## Source details

**Canonical URL:** [Are Prices Countercyclical?](https://www.imf.org/en/publications/wp/issues/2016/12/30/are-prices-countercyclical-839)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/are-prices-countercyclical-839/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/are-prices-countercyclical-839/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/are-prices-countercyclical-839/bundle-manifest.json)

## Bibliographic details
- Authors: Eswar S Prasad, Bankim Chadha
- Published: October 1, 1992
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451851076.001

---

### Objective and methodological critique
- Examines the comovement of prices with the cyclical component of output.
- Argues that applying the same stationarity-inducing transformation to the levels of both output and prices and then examining correlations of the resulting series can be misleading.
- Recommends a more appropriate procedure: examine the correlations between the rate of inflation and the level of the cyclical component of output.

### Empirical findings (post-war U.S. data)
- Correlations between similarly transformed price and output data are consistently and often strongly negative; these negative correlations have been reported by a number of authors as evidence of countercyclical price behavior.
- The rate of inflation is consistently and usually strongly positively correlated with various measures of the cyclical component of output.

### Key concepts and variables emphasized
- rate of inflation
- cyclical component of output (level)
- similarly transformed price and output series (stationarity-inducing transformations)
- aggregate demand, aggregate price level, demand-shift term, supply-shift term, equilibrium inflation rate, responsiveness parameter, sticky prices, supply shocks

### Publication metadata and identifiers
- Authors: Eswar S Prasad, Bankim Chadha
- Date: October 1, 1992
- Series: Working Paper No. 1992/088
- Issue: 088
- Volume: 1992
- Pages: 37
- DOI: https://doi.org/10.5089/9781451851076.001
- Stock No: WPIEA0881992
- ISBN: 9781451851076
- ISSN: 1018-5941

*IMF Working Papers — Are Prices Countercyclical?*

---


_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/are-prices-countercyclical-839_