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.     

QUANTITY AND PRICE INDEXES FOR CONSTRUCTION

Construction has traditionally constituted one of the problem areas in the preparation of industry price and quantity statistm with in the system of national accounts of most countries. The difficulty stems from what is considered to be the unique character of construction projects. This has unnecessarily impeded the calculation of output price indexes and has resulted in the use of various input-based prices as proxies for output prices. One of the objectives of the development of the system of construction price statistics described in this paper is to permit deflation of the outputs of construction industries in order to produce industry output data in constant prices in a manner consistent with measures for the rest of the economy. This is a more promising approach to improving constant price industry and expenditure measures within the SNA framework than attempting such improvements through the collection of a vast array of quantity data. Construction industries sell specified configurations of materials-in-place which are, to borrow the jargon of other fields, sub-assemblies of some total system. As in other areas of industrial pricing, some of these products are simple and some are complex. Trade contractors sell these sub-assemblies or commodities mainly to an owner-builder or to a general contractor who, in turn, resells the trade contractors’ commodities along with whatever sub-assemblies the general contractor has produced. These sub-assemblies, when combined with, for example, the relevant outputs (or sub-assemblies) of manufacturers, the design services of service industries and the purchasers’ own contributions, yield the wide variety of plant and structures which constitute the various classes of gross fixed capital formation, which are not typically solely the outputs of the construction industries. The resulting contractors’ selling price indexes will provide deflators for the whole range of outputs of the various construction industries. These will become part of the system of industry selling price indexes from which relevant indexes for the various goods and services can be selected and combined with appropriate weights to yield arrays of deflators for the highly complex capital expenditures of business, institutions and government. Ultimately this integrated system of construction industry statistics will permit the preparation of gross output and value added measures, in both current and constant prices, to be calculated for the construction industries as an integral part of the Canadian System of National Accounts, as well as provide a key element for improving the deflation of fixed capital formation.     

PRICES AND PRICE ANALYSIS IN THE FRAMEWORK OF THE NATIONAL ACCOUNTS

The paper discusses the role of prices in the framework of the new System of National Accounts (SNA) in terms of three major uses: (1) deflation, (2) price indicators, and (3) price analysis. Following a brief review of the price and quantity measures required by the new SNA with its emphasis on deflation of commodity flows and input-output accounts, in addition to the more conventional deflation of final demand categories, the paper discusses some of the conceptual, methodological and data problems involved in implementing the various uses of prices in the new SNA. Implementing the use of prices as deflators depends, in part, on the concept of output selected (national versus domestic; gross versus net), and which of six concepts of valuation, ranging from purchasers'value to true factor cost, is used. Some of the difficulties in deflating nonmarket flows (e.g., interplant transfers) and industry value added, based on the double deflation method, are discussed. In concept price deflators, which have shifting weights, cannot be used as price indicators, which should have fixed weights. In practice, this is often disregarded and the deflators are used as price indicators. The paper support the SNA recommendation for the development of price indexes with fixed weights to be used as price indicators, in addition to the implicit price deflators. Research in the United States indicates that differences in weights can result in different price measures for various subperiods, components of demand and sector output. Periodic revisions in weights to provide more current fixed weights for price and quantity indexes in each subperiod may minimize the problem but it introduces a new problem—lack of comparability with the constant price tables in the SNA which have fixed weights for the entire period. The new SNA provides a comprehensive and integrated framework for price analysis including the analysis of the structure of aggregate price changes, the industrial origin of final demand prices, and the impact of price change in one sector of the economy on the rest of the economy. Some major gaps which need to be overcome in order to implement the use of the new SNA for price analysis include the development of industry capital stock estimates, separate estimates of proprietors’income, reconciliation of value added and distribution share estimates, and the development of a wide variety of information to supplement the conventional input-output tables in the SNA. Implementing the various objectives of price measures within the framework of the accounts will require a number of improvements in existing price measures and expanding the scope of coverage. “List” prices should be superseded by “transactions” prices and better techniques and data need to be developed to provide for quality adjustment of prices. Coverage will need to be expanded to include services, freight rates, trade margins, government expenditures, and also fill in gaps for many manufactured products. Finally, where possible, use of unit values as price indexes or deflators, e.g., imports and exports, should be replaced by direct price measures.     

Market structure and pricing behaviour in Austrian manufacturing

The paper provides a formal model of price rigidities which is consistent with the observed difference in pricing across industries. The empirical test for a sample of Austrian manufacturing industries confirms the derived propositions. Concentration, inventoriability, export orientation, and disparities in firm size do not influence the price level directly but are shown to have an impact on the sensitivity of prices to demand and cost changes. Cost (demand) changes are less (more) fully transmitted into prices in concentrated industries.I am indebted to the participants of the Industrial Organization Conference held in Vienna in June 1992 and especially to Helmut Schuster and Karl Aiginger for valueble comments.     

Global Determinants of the Gold Price: A Multivariate Cointegration Analysis

The present paper follows publications which have investigated the influence of global liquidity developments on commodity prices and asset price indices. It contributes to the literature by analyzing how global developments in money, output, and inflation can be related to developments in gold prices in a long‐run perspective. Applying a multivariate cointegration (CVAR) analysis, this study investigates long‐run relationships between these variables. The results suggest a significant influence of excess global liquidity on real gold prices and a co‐movement of real gold prices and global inflation.     

"价值总量之谜"试解

“价格总量之谜”即单位商品的价值量与劳动生产率成反比,价值总量与劳动生产率无关。在劳动时间不变的前提下,价值总量总是一个定量。但在现实统计中,按不变价格计算的国民生产总值总是不断增加,似乎它与劳动生产率成正比。如果该命题成立,则国民生产总值却变成了一年社会生产财富的总和,但国民生产总值却是个量价值的加总！为解开这一“谜团”,有的学者提出劳动生产率与价值量成正比的观点,可“正比说”也无法自圆其说,问题的症结出在我们对不变价格计算的国民生产总值范畴内涵认识不清和对马克思劳动价值论的理解不够全面、系统和辩证。如果认识到价值范畴是一个辩证发展的体系时,站在“国际价值”的角度看问题,所谓价值总量之“谜”就不复存在了。     

Cointegration relationships and hedonic pricing of differentiated commodities: an application to price dynamics in the US dairy sector

This study investigates the implications of hedonic pricing for price dynamics of differentiated commodities. A conceptual model of hedonic pricing is developed under a Leontief technology, showing how commodity prices reflect the underlying value of their components. Implications for the existence of cointegration relationships among commodity prices are derived. An application to the pricing and dynamics of selected US dairy commodities is presented. It provides evidence on the role of component valuation in the dynamics of dairy commodity prices in the short run as well as in the long run. Distinguishing between market regime and government regime (when the government price support is active), the analysis finds significant differences in dairy price dynamics between the two regimes.     

Measuring the Chinese business cycle

This article documents the business cycle characteristics of the Chinese economy by adopting both nonparametric and parametric methodologies. The two approaches are applied to relevant macroeconomics indicators – Gross Domestic Product (GDP) and Industrial Production (IP) indices – aiming to investigate the growth cycle (deviation cycle). We provide a clear chronology of the Chinese growth cycle. One significant characteristic of the Chinese growth cycle is the relatively direct influence of government policies. However, recently these policy effects have become less significant when compared to global economic influences. Our study provides an enhanced understanding of the properties of business cycle dating algorithms and as such contributes to future Chinese business cycle research.     

THE MEASUREMENT OF TERMS OF TRADE EFFECTS

The change in goods and services available in a national economy brought about by the shifting of external price relationships is referred to as the terms of trade effects. This paper reviews the various methods which have been devised since the war to define and quantify such effects on the Gross National Product. The statistical annex shows that, as far as OECD countries are concerned, the differences between the various measures are not significant. Whereas the effects from terms of trade represented, on average, less than one half of one percent of the GNP of OECD countries during the 1960's the percentage has increased substantially since 1973, due most importantly to the increase in the oil price; by 1977 (on a 1970 price basis), it had reached 5 percent of GNP in Japan and up to 6 percent in Italy. On the other hand, the extreme case of Saudi Arabia where various formulas generate effects amounting to between one half and the whole of GNP, indicates that the measurement of terms of trade effects by various methods may give different results.     

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.     

Life beyond the Washington Consensus: An Introduction to Pro-poor Macroeconomic Policies

Abstract

This paper develops a rationale for the recession-induced inflation hypothesis. Within a conflicting claims framework we present a model in which both price leaders and organized workers set their nominal prices on the basis of a desired profit rate and a real wage target respectively. We argue that an absolute cost advantage in concentrated industries (for instance in fixed costs) may provide oligopolistic leaders sufficient margin to raise prices and restore a desired level of profitability during a recession. The resultizng unstable income distribution will set off an inflationary spiral if the firm's advantage in selling its output imparts an upward bias to the flexibility of input prices (specifically wages). Taking into consideration different scenarios for workers' bargaining power we present a simple simulation experiment to analyze the inflation and real wage paths of the economy after a negative output shock. When we endogenize output, we show that for a high degree of the bargaining power, output is likely to converge to a higher steady-state value.     

Factor Market Oligopsony and the Production Possibility Frontier

The authors consider a model with two final goods, one intermediate good, and two primary factors. One final good and the intermediate good are produced using primary factors, labor and capital. The other final good is produced using labor and the intermediate input. Producers of the second final good exert oligopsonistic market power on the intermediate input, which captures real world phenomena prevalent in the food processing and other manufacturing industries. If the capital/labor ratio in one final‐good sector is in between those of the intermediate‐input sector and the combined intermediate‐input and the other final‐product sectors, and if the oligopsony power is sufficiently large, the model generates results that are not adherent to the standard two‐sector Heckscher–Ohlin model. Results that deviate from the H–O model include the relationships between factor prices and commodity prices, the price–output effect, tangency between the price line and the PPF, and the curvature of the PPF.     

Factor Substitution and Relative Factor Prices

This paper examines the effects of factor endowments on factor prices in a three‐factor, two‐commodity general‐equilibrium model with endogenous commodity demand and prices. Unlike the conventional small open‐economy model that assumes constant commodity prices, factor substitution influences the direction of these effects. When a factor endowment increases, complementarity with the expanding factor benefits an unchanged factor, but substitutability harms it. If the unchanged factors are complements, there is a possibility of a rise in the expanding factor's price. A comparison of this closed‐economy model with the small open‐economy model reveals the role of international trade, which dampens the effect on the expanding factor's price.     

Primary commodity price fluctuations and developing countries: An econometric model of copper and Zambia

Most of the literature on commodity price fluctuations and their impact on development has been based on cross-country data and aggregated export earnings. The results have been inconclusive, largely because the analysis fails to recognize the importance of country and commodity differences. This paper isolates a single commodity, copper, and a single country, Zambia, which copper export earnings loom large in the economy. It then presents an econometric model of the country, consisting of a disaggregated copper export sector with links to a macro model of the whole economy. Fluctuations in export prices around a smooth trend are then simulated, and their impact on the non-export sectors observed through such a development indicators as exployment levels, GDP levels and growth rates, general price levels and final demand.     

Determining output shadow prices for a cost-constrained technology

We develop a method for computing output shadow prices when total cost and input prices are exogenous, using the indirect output distance function of Shephard (1974). We show that indirect distance function shadow price imputations for output prices are the same to a proportional constant as marginal cost imputations. We motivate our results by relating them to the problem of valuing the output of nonprofit institutions, to some measurement issues for noncompetitive industries, and to a problem of imputing sales of the commercial banking industry to consuming sectors of the economy in the national income accounts.Thanks are due to a very informed and helpful referee.Rolf Färe supported by IHE, Lund, Sweden.     

The sectorial impact of commodity price shocks in Australia

This study reports that commodity price shocks predominantly affect the mining, construction and manufacturing industries in Australia. However, the financial and insurance sectors are found to be relatively unaffected. Mining industry profits and nominal output substantially increase in response to commodity price shocks. Construction output is also found to increase significantly, especially in response to a bulk commodity shock, as a result of increased demand for resource related construction. Increased demand for construction has a positive spillover effect to the parts of the manufacturing industry that supply the construction sector with intermediate inputs, such as the non-metallic mineral sub-industry. In contrast, other manufacturing sub-industries with only tenuous links to the resources sector such as textiles, clothing and other manufacturing, are relatively unresponsive to commodity price shocks.     

Unfolding the Turbulent Century: A Reconstruction of China's Historical National Accounts, 1840–19121

This paper reconstructs China's economic development between 1840 and 1912 with an estimation of Gross Domestic Product (GDP). It provides for the first time a time series of GDP (per capita) for the late Qing Dynasty (1644–1911), based on sectoral output and value added, in current as well as in constant prices. The present estimation of per capita GDP in the late Qing period comes out higher than previous estimations, but it still suggests low average levels of Chinese living standards. The economy during the late Qing Empire was characterized by a large and growing agricultural sector and displayed only minor structural changes. Only in the beginning of the twentieth century did the economy start to show signs of growth.     

Dynamics of money, output and price interaction — some Indian evidence

The present study is an attempt to model the dynamic interactions between money, output and prices in a structural vector autoregression framework. The primary concern of the paper is to examine the sources of variations and response of one variable to changes in others in a system of economic variables in the Indian context. Using quarterly data from 1970Q1 to 1990Q4, we find that structural factors, in addition to monetary factors, play an important role in generating and sustaining the process of inflation and fluctuations in economic activity. An increase in money/credit supply is found to increase output and prices in the short-run and prices in the long-run, while a non-accommodating monetary policy is ineffective in controlling inflation even at the cost of substantial output losses, thereby indicating relative rigidities in price movements. Another interesting finding is that the monetary authority responds differently to different price shocks, exercising its leverage in altering the quantity as well as the composition of aggregate money supply. Our findings also indicate that the economy is characterized by relatively large and infrequent shocks to ‘price/cost’-related factors. Finally, our analysis suggests that a simple monetary targeting without adequate ‘supply side’ measures may not be able to serve the objective of maintaining growth with price stability.     

中国房地产价格泡沫原因分析

房地产业与其他行业联系密切,对国民经济发展具有明显的拉动作用。20年来,中国房地产业逐步发展壮大。伴随着中国房地产市场的强劲增长,其价格出现了泡沫化倾向。本文分析了我国房地产价格泡沫的原因,指出流动性膨胀、房地产市场虚拟化、虚拟经济部门资金错配、土地价格不断上涨和房地产市场需求刚性是房地产价格出现泡沫的主要原因。当前的挤出政策治标不治本,改堵为疏才是正确选择。