Long waves in prices: new evidence from wavelet analysis

In this paper we apply wavelet analysis for the detection of long waves in wholesale price index for France, the UK and the US. By applying wavelet energy decomposition and multiresolution analysis we find that i) the component corresponding to long waves provides a larger contribution in terms of energy coefficients in comparison to classical business cycles cyclical components, and ii) there is a close correspondence with the chronology provided in the literature on the long waves in prices, with such correspondence holding not only for the pre-WWII period, but also after WWII, a period where long waves in prices are difficult to detect because of the positive trend displayed by prices. Comparison with BK and CF band-pass filtered components based on the chronology provided in the literature on long wave cycles indicates that wavelet analysis can provide a reliable and useful sta- tistical methodology in order to analyze the dynamics of long waves in historical time series.