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COST-OF-LIVING ADJUSTMENTS AND BUSINESS CYCLES: DISAGGREGATED EVIDENCE

Published online by Cambridge University Press:  01 August 2003

MAGDA KANDIL
MAGDA KANDIL
Affiliation:
International Monetary Fund
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Abstract

For a sample of U.S. industries, nominal wage and price inflation follow aggregate price inflation closely during economic expansions. Hence, fluctuations in profit markup and real output are moderate in the face of expansionary demand shocks. In contrast, workers' real standard of living decreases during recessions, while producers attempt to maintain, or even increase, industrial real-price inflation. The increase in profit markup correlates with larger output contraction during recessions.

Type
Articles
Information
Macroeconomic Dynamics , Volume 7 , Issue 4 , September 2003 , pp. 537 - 566
Copyright
© 2003 Cambridge University Press

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