The Relation of Economic Growth and Price Level: A Comparative Study of Mexico and the United States

Abstract

This study aims to study the correlation between real GDP and GDP deflator. As regions with high economic development typically have higher price levels than less developed regions, this social phenomenon inspires this study to study the short-run relationship of these variables. An empirical study in this paper is done through detrending, and further calculations are done regarding descriptive statistics to figure out this relationship. As the major finding of this paper, in the short run, real GDP and price level have a rather weak correlation, and real GDP is much more volatile than the price level.