On the upsurge of U.S. food prices revisited

The objective of this study is to empirically examine the effects of changes in exchange rate, commodity price and energy price on five U.S. food prices — cereal/bakery, meats, dairy, fruits/vegetables and beverages. The Johansen cointegration analysis and a vector error-correction (VEC) model are applied to monthly data for the 2001–2010 period. Results show the existence of stable long-run relationships among the selected variables. We also find that energy and commodity prices have influenced U.S. food prices mainly through changes in prices of cereal/bakery, meats and dairy. Finally, exchange rate is found to have been a significant factor influencing U.S. food prices. The Energy Independence and Security Act of 2007 is one of main driving forces for the recent food price inflation, which has affected negatively consumers, especially low income households, in the United States.     

理解中国的实际汇率:一价定律偏离还是相对价格变动?

本文利用1997年1月至2010年9月的数据对人民币实际汇率进行分解,发现可贸易品偏离一价定律因素可以解释实际汇率波动的60%—80%,而可贸易品与不可贸易品之间的相对价格波动只能解释实际汇率波动的20%—40%。这意味着研究人民币实际汇率需要更多地从可贸易产品出发,不应仅仅强调国内不可贸易品与可贸易品的相对价格变化。进一步的研究发现,可贸易品因素对于解释人民币实际汇率占主导的结论,与中国相对于其他国家的经济体发展阶段有关。但是,上述结论并不意味着传统的"巴拉萨-萨缪尔森"效应失灵。事实上,当在计量回归中控制可贸易品偏离一价定律因素以后,巴萨效应在中国显著成立。只不过,相对于可贸易品偏离一价定律因素,巴萨效应对实际汇率波动的影响是次要的。     

Understanding International Price and Consumption Disparities

This study proposes a new measure of the tradability of 120+ commodities based on price dispersion. This approach is used to construct price indices of tradables and non-tradables for 150+ countries. The expenditure share of tradables is lower for richer countries, while the relative price of non-tradables, which plays an important role in the determination of real exchange rates, is higher. Secondly, a common-factor approach (based on principal components) is introduced to compress the large volume of information on prices and quantities consumed globally. We find that cross-commodity correlations are higher for prices than for consumption. In addition, income is responsible for most of the variation in the first principal component of consumption but explains less of the first price component. This suggests consumption are driven primarily by domestic factors, while prices are determined by factors outside the country, along the lines of the Purchasing Power Parity theory.     

Exchange Rate Passthrough to Export Prices: Assessing Cross‐Country Evidence*

A growing empirical literature reports evidence of a decline in exchange rate passthrough to import prices in a number of industrial countries. Our paper complements this literature by examining passthrough from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We find that the prices charged on exports to the United States are more responsive to the exchange rate than are export prices to other destinations, which is consistent with results in the literature that import price passthrough in the US market is relatively low. In addition, the exchange rate sensitivity of export prices over time has been significantly affected by country‐ and region‐specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom).     

Refinery mix in the U.S., Canada,and the E.E.C.

This paper examines the response of gasoline's share of a barrel of crude oil to changes in relative petroleum product prices. An inter-country comparison of the U.S., Canada, and the E.E.C. allows investigation of different parts of the production possibility frontier. In the U.S. and Canada, with relatively large amounts of cracking capacity, there is price responsiveness of the product mix to changes in relative product prices. In the U.S., both residual and distillates are substitutes in production for gasoline, but for Canada, only distillate is a substitute. Part of this difference is attributed to the U.S. oil quota. For the E.E.C. with relatively small amounts of cracking capacity there was no discernible effect of product prices on product mix.     

Product Variety and Real Exchange Rates: The Balassa-Samuelson Model Reconsidered

This paper introduces product variety into the Balassa-Samuelson model in order to extend the model of real exchange rate determination. With product differentiation, real exchange rates depend not only on the relative price of nontradables to tradables but also on relative prices among tradables. This paper identifies a new factor that determines the extent of variety, termed Infrastructural Technology, and that affects real exchange rates not through the relative price of nontradables but through relative prices among tradables. This paper also conducts empirical tests, and the results of these tests support the model. Received May 31, 2001; revised version received March 20, 2002 Published online: April 30, 2003     

DYNAMICS BETWEEN NORTH AMERICAN AND EUROPEAN AGRICULTURAL FUTURES PRICES DURING TURMOIL AND FINANCIALIZATION

North American and European agricultural futures markets faced significant changes in recent years, i.e., the financialization which originated in the USA, the increase of futures trading in Europe and the recent price turmoils in international commodity markets. We analyse the long‐ and short‐run dynamics between North American and European agricultural futures prices during these institutional changes. The empirical results show that the US markets lead in terms of price transmissions and volatility spillovers. US markets, however, predominantly react to deviations from the long‐run equilibrium which indicates a rising impact of European agricultural markets on a global scale.     

Nominal rigidities and retail price dispersion in Canada over the twentieth century

Abstract We introduce a new data set on over 230,000 monthly prices for 10 goods in 50 Canadian cities over the 40‐year period from 1910 to 1950. This information, coupled with previously published price information from the late twentieth century, allows us to present one of the first comprehensive views of nominal rigidities and retail price dispersion over the past 100 years. We find that nominal rigidities have been conditioned upon prevailing rates of inflation with a greater frequency of price changes occurring in the 1920s and the 1970s. Additionally, the process of retail market integration has followed a U‐shaped trajectory with many domestic markets being better integrated – as measured by the average dispersion of retail prices – at mid‐century than in the 1990s. We also consider the linkages between nominal rigidities and price dispersion, finding results consistent with present‐day data.     

NEW MEASURES OF PRICES AND PRODUCTIVITY FOR TRADABLE AND NONTRADABLE GOODS*

Empirical work on the division of real output and prices into tradable and nontradable components has not kept pace with theoretical developments. The conventional proxies of prices and productivity by tradable and nontradable sector are examined and found deficient in several important respects. It is demonstrated that an approach that relies on the long–standing data on gross domestic product by industry of origin can overcome some of these deficiencies. These data are used to construct new annual measures of prices and productivity for tradable and nontradable output for 12 industrial countries over the period 1950–73. While far from precise, the new measures are consistent with the following criteria for distinguishing between tradables and nontradables: the degree of foreign trade participation should be higher for tradables than for nontradables; the degree of international commodity arbitrage, as measured by cross-country correlations of price changes, should be higher for tradables than nontradables; and tradables should be closer substitutes than nontradables for traded goods from other countries (imports). Despite the considerable conceptual advantages of the new measures of prices and productivity over the conventional proxies, correlation analysis indicates that the new and old measures usually move together rather closely in our 12 subject countries. The correlations are higher across the alternative relative productivity measures than for the alternative relative price measures.     

U.S. OIL DEMAND AND CONSERVATION

Recent history has lent casual support to three popular theories about U.S. oil demand: (i) U.S. oil consumption is very insensitive to changing oil prices, (ii) non-price conservation has reduced U.S. oil demand, and (Hi) U.S. oil consumption falls more when oil prices rise than it rises when oil prices fall. Together, these theories suggest that one could hold oil consumption constant without much economic sacrifice. The authors' econometric evidence does not support these theories. This evidence indicates that U.S. oil consumption is fairly responsive to price changes over the long run, but with a considerable lag. Sharp oil price increases—or an equivalent policy action—would be needed to hold oil consumption constant during the 1990s.     

Offshoring,Sourcing Substitution Bias,and the Measurement of Growth in U.S. Gross Domestic Product and Productivity

The decade before the financial crisis of 2008 was a time of large changes in sourcing patterns for manufactured goods, particularly after China's entry into the WTO in 2001. Sourcing substitution reduced the prices paid by wholesale level buyers of these goods, but these price reductions were mostly not captured in the U.S. import price indexes and the U.S. GDP deflator. To find plausible values for sourcing bias we first use data on changes in sourcing patterns over 1997–2007 to predict the effect of the reported price discount from the new emerging market suppliers. Next, we compare adjusted import price indexes for products used for household consumption with consumer price indexes. In the GDP deflator for apparel imports, sourcing bias is found to average 0.6 percent per year, and for durable goods it averages 1 percent per year. During the decade of rapidly changing sourcing patterns, a tenth of the reported speedup in multifactor productivity growth of the U.S. private business sector may have come from sourcing bias in the deflators for imports.     

Exchange Rate Pass‐Through And The Welfare Effects Of The Euro*

This article explores the implications of the European single currency within a simple sticky price intertemporal model. We focus on the question of how the euro may change the sensitivity of consumer prices in Europe to exchange‐rate changes. Our central conjecture is that the acceptance of the euro will lead European prices to become more insulated from exchange‐rate volatility. We find that this affects both the volatility and levels of macroeconomic aggregates in both the U.S. and Europe. We find that European welfare is enhanced, and the U.S. shares in Europe's good fortune.     

NORTH AMERICAN FREE TRADE AGREEMENT BILATERAL TRADE EFFECTS

This study evaluates the effects of the North American Free Trade Agreement (NAFTA) on bilateral trade between the United States and Canada and between the United States and Mexico. Trade flow estimates are from a vector autoregression (VAR) model. The VAR methodology allows modeling bilateral trade in a flexible manner that incorporates both the interaction between different variables and the dynamics of trade, output, prices, and the exchange rate. After testing the outside sample forecasting ability of the models, the study produces dynamic forecasts of bilateral trade. It then compares forecasts incorporating the effects of the NAFTA with baseline forecasts. The results suggest expanded trade for all three countries and an improvement in the U.S. trade position with both Canada and Mexico.     

Exchange rate pass-through in the U.S. automobile market: A cointegration approach

This study analyzes exchange rate pass-through in the presence of monopolistic competition in the U.S. automobile market. Using cointegration techniques, we investigate how foreign competing firms' prices interact following an exchange rate-shock. The results generally indicate price interdependence (competition) among the rival firms. In one case where we did not find any price interdependence, the extent of exchange rate pass-through was higher. This validates the economic intuition that a low degree of price competition corresponds with a high degree of exchange rate pass-through.     

The price relationship between organic and non-organic vegetables in the U.S.: evidence from Nielsen scanner data

This study investigates price relationships between organic and conventional carrots, tomatoes, and lettuce in the U.S. utilizing Nielsen scanner data from 2006–2015. We employ a threshold vector error correction model (TVECM), threshold vector autoregressive model (TVAR), and threshold cointegration test to test whether market integration exists between organic and conventional vegetables as well as the existence of asymmetric price transmission. The results find positive long-run relationships between organic and conventional prices of carrots and tomatoes and show the existence of asymmetric price transmission in price pairs of lettuce and tomatoes. Our findings suggest that the price relationship between organic and conventional vegetables varies by characteristics, such as shelf life, volatility in the price premium, and substitutability.     

Asset prices and expected monetary policy: evidence from daily data

This article explores the relationships among Libor, gold prices, the exchange rate, oil prices, fed funds futures prices and stock prices at a daily frequency. This article examines whether expected monetary policy, measured by changes in the prices of fed funds futures contracts, reacts to high frequency changes in asset prices and, in turn, whether asset prices respond to changes in expected monetary policy. The article reveals that there are statistically significant relationships between expected US monetary policy and shocks to Libor and exchange rates. It also reveals that there is no evidence of a systematic relationship between stock prices and expected monetary policy changes. Splitting the data into expansionary and recessionary periods using NBER dating, we find results for the expansionary periods that are very similar to the results for the entire period. For the periods of recession, we find little evidence of significant linkages between markets.     

The impact of subprime mortgage on correlation between stock and FX markets

Our researching period contains the American subprime mortgage crisis, an insignificant financial crisis and the Asian financial crisis periods. We analyse and compare the interrelations between the stock and Foreign Exchange (FX) markets in Taiwan by the daily data of stock prices and NTD/US exchange rates. The empirical results found that there is no effect on the long-term equilibrium between the stock and FX markets during the American subprime mortgage crisis. It also shows that, whether financial crisis occurs or not, there is no cointegration between the stock and FX markets. Furthermore, the results find that there exists bidirectional causality between the stock and FX markets among the American subprime mortgage crisis and the Asian financial crisis period. However, there is only unidirectional relationship from stock prices to exchange rates during insignificant financial crisis period. Such results imply that two financial crises do significantly affect the short-term interrelationships between the stock and FX markets and lead to more importance for the connection between two markets.     

Financial Integration and Market Efficiency: Some International Evidence from Cointegration Tests

This study investigates whether the globalization of financial markets enhances the efficiency of national stock markets. To this end, we have developed a dynamic representation of cointegration which is consistent with hypothesis that stock prices reflect the efficient discounting of new information on market fundamentals and testes for market efficiency in five industrialized markets (the United States, Canada, Japan, the United Kingdom, and Germany) over the last two decades. Our empirical analysis indicates that the U.S. and Canadian stock markets obey the long-run equilibrium path implied by our dynamic cointegration model, but the Japanese, British, and German markets do not exhibit such characteristics. Thus, it can be claimed that the stock markets of the United States and Canada are informationally efficient, whereas those of Japan, the United Kingdom, and Germany are not. [G15, G14]     

Commodity Prices and the Dynamics of Inflation in Commodity‐Exporting Nations: Evidence from Australia and Canada*

A commodity‐price boom is under way. What does this boom mean for inflation in countries with substantial net commodity exports? The answer depends on movements in commodity prices, changes in foreign exchange rates and the determinants of domestic price inflation. We estimate equations to provide indications of the strength of each of these forces for both Australia and Canada. The results show that world commodity prices move pro‐cyclically with world industrial production and that rates of change in commodity prices are directly related to domestic inflation in both countries. However, there is an offsetting impact of exchange‐rate changes, which is strong enough in the case of Australia, but not Canada, to substantially eliminate the inflationary impact of a commodity‐price boom.     

Exchange Rates and Stock Prices in the MENA Countries: What Role for Oil?

This paper considers the linkage between stock prices and exchange rates in four MENA (Middle East and North Africa) emerging markets. In contrast to the existing evidence that uses a global market index to uncover such a relationship it is found that for the sample countries oil prices emerge as the dominant factor in the above relationship. The paper considers the presence of regime shifts and evidence is found of cointegration only for the period following the 1999 oil price shock. Readjustment towards equilibrium in each stock market occurs via oil price changes. Finally, a number of robustness checks are performed and persistence profiles produced.