This paper reexamines the oil price-macroeconomy relationship with rolling Granger causality and structural stability tests. It finds that the relationship broke down amidst the falling oil prices and market collapse of the 1980s, suggesting misspecification of the oil price rather than a weakened relationship. Some proposed respecifications of the oil price yield considerable improvements, alt...

How inflation and unemployment are related in both the short run and long run is perhaps the key question in macroeconomics. This paper tests various price equations using quarterly U.S. data from 1952 to the present. Issues treated are the following. 1) Estimating price and wage equations in which wages affect prices and vice versa versus estimating “reduced form” price equations with no wage ...

Much of the inflation forecasting literature examines the ability of macroeconomic indicators to accurately predict mean inflation. For the period after 1984, existing empirical evidence largely suggests that the likelihood of accurately predicting inflation using macroeconomic indicators is no better than a random walk model. We expand the scope of inflation predictability by exploring whether...

The paper considers the use of a Consumer Price Index (CPI) for three possible purposes: (1) as a Cost of Living Index (COLI); i.e., as a measure of the relative cost of achieving the standard of living when facing two different sets of prices for the same group of commodities; (2) as a consumption deflator; i.e., the price change component for a decomposition of a value ratio into price and qu...

We consider an economic model with a deterministic money market account and a finite set of basic economic risks. The real-world prices of the risks are represented by continuous time stochastic processes satisfying a stochastic differential equation of diffusion type. For the simple class of log-normally distributed instantaneous rates of return, we construct an explicit state-price deflator. ...

and quantity indexes are calculated separately for components of GDP and therefore the difference between nominal GDP and real GDP growth is only approximately equal to the change in the GDP price index. With fixed-weights, the GDP deflator is defined as the ratio of nominal to real GDP and hence the gap between nominal and real GDP growth rates is precisely equal to the growth rate in the GDP ...

There are numerous sources of bias in medical care price indices that lead to non-trivial biases in overall price indices such as the GDP deflator and the Consumer Price Index. I begin by reviewing various uses of price indices and therefore why both biases and changes in those biases matter. I describe the theory underlying official price indices. I next turn to problems of measuring medical p...

This paper examines two different measures of wages as predicators of prices in a vector errorcorrection framework using quarterly data for the U.S. for the period from 1947.Q1 through 2008.Q1. Based on cointegration and a series of exogeneity tests, it is found that: 1) there is a stable, long-run relationship between the Consumer Price Index (CPI) and the Personal Consumption Expenditure Defl...

THE MAJOR ECONOMIC ACHIEVEMENT OF 1982 was a dramatic reduction of inflation to its lowest rate in a decade. The 4.6 percent increase in the gross national product (GNP) implicit price deflator between the fourth quarters of 1981 and 1982 was less than half the 10.2 percent rate of increase between the fourth quarters of 1979 and 1980. This decline in inflation has moderated the earlier widespr...

In this research we model and estimate the effects on productivity downstream from information technology (IT) investments made upstream. Specifically, we examine how one industry’s productivity is affected by the IT capital stock of its suppliers. These supplier-driven IT spillovers occur because, due to competition in the supplying industry, quality benefits from suppliers’ IT investments can...