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Output and Prices in Norway Ola H Grytten NHH and Norges Bank.
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Transcript of Output and Prices in Norway Ola H Grytten NHH and Norges Bank.
Output and Prices in Norway
Ola H Grytten
NHH and Norges Bank
Classical Keynesian view
Short term output fluctuations are demand side led
Thus, price fluctuations should mirror output fluctuations
Hence, inflation targeting is a way of monitoring counter cyclical monetary policy
Challenging the Keynesian view
Empirical research has challenged the notion of co-movement of prices and output Haan 2000
Some correspondence in the US after WWII. Stock and Watson 1998, King and Rebelo 2000
Lack of correspondence in the US during the last decades
Husebø og Wilhelmsen 2005 Lack of correspondence in Norway during the last
decades
Historical findings for Norway
Do prices and output correlate in the short run in Norway? Output series
Aggregated GDP from 1830 onwards
Disaggregated for parts only Price series
Aggregated CPI from 1516 onwards
Aggregated and disagregated Implicit deflators from HNA
Historical GDP-figures
Nordic project aiming at constructing Nordic historical national accounts (NHNA)
HMS Norwegian historical national accounts (HNN)
1830 - present (Grytten 2004) Major indicators GDP 1830 - 1865 (Grytten 2004) GDP 1865 - present (Statistics Norway 2008)
Historical CPI-prices Norwegian CPI 1516-present (Grytten 2004)
Part of HMS Grain prices 1516-1666 (Aschehoug 1888) Consumer commodities 1666-1819 (Grytten 2004) CLI 1819-1830 (Grytten 2004) CLI 1830-1871 (Grytten 2004) CLI 1871-1910 (Ramstad 1982) CLI 1910-1916 (KSO) CLI 1916-1919 (MSA) CLI 1919-1959 (SSB) CPI 1959-2008 (SSB)
CPI and GDP per capita volumes 1830-2006
1
10
100
1000
10000
100000
1000000
18301838184618541862187018781886189419021910191819261934194219501958196619741982199019982006
CPI
Yn/c
Yr/c
Annual changes output and prices
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
18301837184418511858186518721879188618931900190719141921192819351942194919561963197019771984199119982005
CPI
Yr/c
Annual changes output and prices 7YSMA
0.9
1
1.1
1.2
18301839184818571866187518841893190219111920192919381947195619651974198319922001
CPI
Yr/c
Output and price cycleslogCt-logTt (T=HP-filtered trend)
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
183018401850186018701880189019001910192019301940195019601970198019902000
CPI
Yr/c
Output and price cycles7YSMA logCt-logTt
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
183018401850186018701880189019001910192019301940195019601970198019902000
CPI
Yr/c
Table 1. Correlation coefficients on HP-cycles GDP per capita volumes and CPI 1830-2006.
1830-1913 1913-1952 1952-2006 1830-2006
Annual
Simultaneous -0.0813 -0.3824** -0.1901 -0.2645** 0.4699 0.0162 0.1605 0.0004
1 year price-lag 0.2342** -0.3102* -0.0091 -0.1162 0.0342 0.0584 0.9474 0.1257
2 years price lag 0.2706** -0.1852 0.1937 -0.0242 0.0146 0.2725 0.1605 0.7513
1 year price lead -0.1214 -0.3461** -0.2104 -0.2807** 0.2773 0.0333 0.1231 0.0002
2 years price lead -0.1696 -0.2741 -0.0533 -0.2365** 0.1301 0.1007 0.7013 0.0017
7YSMA
Simultaneous 0.1029 -0.4896** -0.2086 -0.4070** 0.3637 0.0016 0.1418 0.0000
1 year price-lag 0.3471** -0.2837* -0.0743 -0.2465** 0.0017 0.0843 0.6081 0.0012
2 years price lag 0.4561** -0.0556 0.0579 -0.0663 0.0000 0.7438 0.3448 0.3932
1 year price lead -0.1103 -0.6099** -0.3780* -0.5165** 0.3332 0.0000 0.0062 0.0000
2 years price lead -0.2686** -0.6258** -0.4798** -0.5511** 0.0174 0.0000 0.0004 0.0000
Preliminary conclusions
Difficult to trace positive correspondence between short-term prices and output in Norway 1830-2006.
Some differences between sub-periods Need further investigation
By industry By sector Co-integration studies International comparisons