The Co-Movement between Output and Prices in the EU15 Countries: An Empirical Investigation

Jesús Vázquez, Universidad del País Vasco

Abstract

This paper studies the comovement between output and prices in the EU15 countries. Following Den Haan (2000), I use the correlations of VAR forecast errors at different horizons in order to analyze the dynamics in the output-price relationship. The empirical results show that ten countries display a significant negative comovement between output and prices in the `long-run' whereas this is positive in the `short-run' only for three countries. Finally, four countries do not exhibit any significant comovement.