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Output and Prices in Norway

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.

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Output and Prices in Norway

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  1. Output and Prices in Norway Ola H Grytten NHH and Norges Bank

  2. 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

  3. 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

  4. 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

  5. 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)

  6. 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)

  7. CPI and GDP per capita volumes 1830-2006

  8. Annual changes output and prices

  9. Annual changes output and prices7YSMA

  10. Output and price cycleslogCt-logTt (T=HP-filtered trend)

  11. Output and price cycles7YSMA logCt-logTt

  12. 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

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