DP10128 Reexamining the Cyclical Behavior of the Relative Price of Investment

Author(s): Paul Beaudry, Alban Moura, Franck Portier
Publication Date: September 2014
Keyword(s): business cycles, relative price of investment
JEL(s): E3
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10128

We document the cyclical behavior of several measures of the relative price of investment goods for the U.S. economy over the last fifty years. Our main result is that there is no robust evidence that this relative price is countercyclical in the data. Furthermore, for the recent (post-Volcker) period, the relative price of investment appears predominantly procyclical. When looking at more disaggregated series, most measures are procyclical, a few acyclical, and only the price of equipment is countercyclical for some periods and measures. The procyclical behavior of the relative price of aggregate investment is also found for the six other countries of the G7.