Skip to main content

Procyclical Prices: A Demi-Myth?

Quarterly Review 1524 | Spring 1991

Download PDF


Procyclical Prices: A Demi-Myth?


This paper critically reevaluates recent claims that the postwar U.S. price level exhibits countercyclicality. While overall countercyclicality is confirmed, temporal disaggregation suggests a shift from pro- to countercyclicality in the early 1970s. Furthermore, the countercyclicality is markedly more pronounced for negative than for positive output innovations. The evidence thus casts doubt on single-source business cycle explanations.