The behaviour of producer prices: evidence from French PPI micro data

This paper provides some new empirical findings for how French producers set prices. We used the micro data that composes the producer and business-service price indices from 1994 to 2005. First we address how producer prices are collected. Then we present the main characteristics of how producers change their prices: they are modified infrequently and in small amounts. Also, a behavioural heterogeneity across sectors is observed. Business-service prices change less often than industrial producer prices. The data corroborates both time and state-dependent model predictions. Taylor contracts are not unusual, but a firm’s prices will also react to its economic situation. Nevertheless, the most relevant models, to explain producer price rigidity, are time-dependent.

“The fact that some prices are rigid or sticky, while others are variable, has attracted a good deal of comments from economists in recent years” Tucker (1938)

This study was conducted in the context of the Eurosystem Inflation Persistence Network. Data were processed under the responsibility of INSEE in the context of an agreement between INSEE and the Banque de France (20B-21B-E301/R05019/2005).     

A fractionally integrated exponential STAR model applied to the US real effective exchange rate

The aim of this paper is to study the dynamics of the US real effective exchange rate by capturing non-linearity and long-memory features. In this context, we use the family of fractionally integrated STAR (FISTAR) models proposed by van Dijk et al. (van Dijk, D., Franses, P.H., and Paap, R., 2002. A non-linear longmemory model with an application to US unemployment. Journal of Econometrics 110, 135–165.) in the case when the transition function is an exponential function and we develop an estimation procedure. Indeed, these models can take into account processes characterized by several distinct dynamic regimes and persistence phenomena.     

Behavioural equilibrium exchange rate and total misalignment: evidence from the euro exchange rate

In the present paper we attempt to investigate whether the nominal exchange rate of the euro against the currencies of the four major trading partners of the eurozone, namely China, Japan, the UK and the USA, converges or not to its equilibrium level. Applying recent unit root and system cointegration techniques in the presence of structural shifts in the data, our results indicate that there exist an equilibrium relationship between each of the euro/yuan, euro/yen, euro/UK pound and euro/US dollar nominal exchange rates and the fundamentals defined by the monetary model. Following these results, our modified Behavioural Equilibrium Exchange Rate model suggests that at the end of the estimated period, the euro/Chinese yuan and the euro/UK pound nominal exchange rates follow an equilibrium process. Our empirical results also imply that the single European currency is considered as overvalued against the US dollar, while it is considered as undervalued against the Japanese currency.     

Superstition and real estate prices: transaction-level evidence from the US housing market

We investigate the impact of superstition on prices paid by Chinese-American home buyers. Chinese consider 8 lucky and 4 unlucky. Lacking explicit buyer ethnicity identifiers, we develop a binomial name classifier, a machine learning approach applicable to any data set containing names, that allows for falsification tests using other ethnic groups, and mitigates ambiguity from the transliteration of Chinese characters into the Latin alphabet. Chinese buyers pay 1–2% premiums for addresses including an 8 and 1% discounts for addresses including a 4. These results are unrelated to unobserved property quality; no premium exists when Chinese sell to non-Chinese. The persistence of superstitions reflects the extent of cultural assimilation.     

Conjoint analysis of industry location preferences: evidence from the softwood lumber industry in the US

Conjoint Analysis (CA) was used to study location preferences among members of the softwood lumber industry in the southern and western regions of the US. This industry was selected as an example of a resource-based industry to test several hypotheses derived from location theory. Decision-makers, owners and managers, identified price of logs and distance to sources for logs as the most important location factors. A secondary category included wages and energy costs. Other variables such as cost of land, quality of access roads and distance to markets are less important. There were statistically significant differences in the part-worth estimates of raw materials and wage costs among decision-makers but not between regions in an ordered model for site preference. Marginal analysis of the price of logs stressed its importance as the major location factor in the softwood lumber industry.     

Retail price responses to changes in wholesale prices in the US beef industry: differences among quality grades and primal cuts

This study examines the transmission of wholesale prices to retail prices for differentiated beef products. Specifically, we study vertical price movement for products differentiated by quality grades and primal cuts in the US beef industry. Our study considers two quality grades– United States Department of Agriculture (USDA) Choice and USDA Select, and three primal cuts– chuck, round and sirloin. Using threshold-based autoregressive and error correction models, and non-linear impulse response functions, we explore if characteristics of price adjustment differ by quality attributes of the products. Results show that there exists the ‘rocket and feather’ effect in the adjustment of retail prices of most beef grades and cuts in response to changes in wholesale prices, and such asymmetric adjustment effect is more pronounced for higher quality grade (Choice) than lower quality grade (Select). Evidence of similar price adjustment is found from the high-quality cut (sirloin). Our results underscore the differences in price adjustment by product quality in the US beef industry.     

Federal and union job queues: further evidence from the US labour market

Recent research on union differentials suggests that although the premium to unionization is higher in the private sector, it can hardly be ignored in the federal sector. Consequently, the nature and length of the federal queue may differ between union and non-union sectors. Similarly, the union queue may not necessarily be homogeneous between federal and private sectors. We estimate separate queues for federal-union, federal-non-union and private-union jobs from the same sample. This avoids the problem of simultaneity between the federal queue and the union queue. In addition, it explores several important differences that exist between these queues.     

The exchange rate pass-through into import prices: the case of Japanese meat imports

Japan is a traditional net importer of food products in general and meat products in particular. Japanese meat imports come from a few countries thus making Japan potentially very sensitive to the swings in one or a few bilateral exchange rates. One of the key contributions of this article is the use of commodity (meats in this case) imports weighted exchange rates in the analysis. The standard practice in previous international agricultural trade studies related to either exchange rate pass-through or pricing to market was to use the aggregate trade weighted exchange rates usually provided by the Central Bank authorities or sources. Beef and poultry import prices indicate partial exchange rate pass-through while import prices of pork indicate zero exchange rate pass-through, primarily due to gate price policy system applied to pork imports. In terms of competitiveness, these results suggest relatively more competitive markets among poultry importing firms, somewhat competitive markets among beef importing firms, while competitiveness of pork importing firms could not be assessed due to existing import policies.     

The impact of 11/13 Paris terrorist attacks on stock prices: evidence from the international defence industry

This study explores the effect of the Paris terrorist attacks on the stock returns and the volatility for the most important companies in the global defence industry. To this end, it employs the General Autoregressive Conditional Heteroscedasticity methodology. The findings clearly indicate that this terrorist event has a positive impact on both the returns and the volatility of these stocks.     

Dynamic linkages between Asian stock prices and exchange rates: new evidence from causality in quantiles

This article applies the Granger causality test in quantiles to investigate causal relations between stock returns and exchange rate changes for nine Asian markets over the period 1 January 1997 to 16 August 2010. Our empirical results indicate that the quantile causal relations vary across different quantiles and different periods. Although the causal effects of exchange rate changes on stock returns (or stock returns on exchange rate changes) are heterogeneous across quantiles, the overall evidence suggests that most stock and foreign exchange markets are negatively correlated. The result shows that there are more bidirectional causal relations in accordance with this method than the conventional least square (LS) estimation. The symmetry of these quantile causal effects (the ‘averaging effect’) helps to explain why conventional LS method usually obtains an insignificant result of causality.     

Oil prices and the real exchange rate in Iran: an ARDL bounds testing approach

This article examines the impact of oil prices on the real exchange rate in Iran during the 1961–2014 period using the autoregressive distributed lag approach to cointegration as the estimation method. We find that higher oil prices lead to appreciation of the real exchange rate. The results reveal that oil prices have both short-run and long-run effects on the real exchange rate.     

The attrition rate of United States coins in circulation: some evidence from Federal Reserve data

The United States Mint recently conducted a coin attrition study designed to estimate the rate at which coins are withdrawn from circulation in order to better plan coin production. This paper reports on the analysis of a large sample of coins taken from the United States Federal Reserve Bank cash offices used to estimate coin attrition rates by denomination. The dollar value of the circulating stock of coin available to serve the needs of commerce is estimated to be $11.8 billion (£7.6 billion).     

Competition,product line length,and firm survival: evidence from the US printer industry

Adjusting product line length is one major strategy that firms employ to sustain their market position in competitive environments. This study extends extant literature on product line length by adding empirical results on the relationship between competitive intensity and product line length, and by examining the performance of firms that follow the suggested product line strategies. The analysis of data on 1849 printer products introduced by 342 manufacturers from 1983 to 2002 shows an inverted U-shaped relationship between competitive intensity and product line length, and firms following this pattern have a significantly lower hazard ratio of exit. These results confirm those discussed in the previous literature and provide evidence of the positive impacts of following such product strategies on firm survival.     

The impact of exchange rate volatility on commodity trade between the US and Thailand

The impact of exchange rate volatility on trade flows continues to occupy the international finance literature. More recent studies have deviated from the traditional approach of using aggregate trade flows and have employed trade data at commodity level. This study investigates the impact of exchange rate uncertainty on the trade flows of 118 US exporting industries to Thailand and 41 US importing industries from Thailand. We find that exchange rate uncertainty has short-run effects on the trade flows of most industries. In the long-run, the main determinants of the trade flows are the level of economic activity in both countries.     

The impact of electricity prices on foreign direct investment: evidence from the European Union

We examine the impact of electricity price variation on net FDI (%GDP) inflows in countries of the European Union. We use panel data of 27 EU countries for a period of 2003 – 2013. We show that electricity prices of south-western and north-eastern EU countries did not converge to one price until now. Dynamic panel data analysis using system GMM shows that besides unit labour costs, tax rates and competitive disadvantage in secondary education, also higher electricity prices reduce countries’ ability to attract FDI. The immediate effects are statistically significant across both sub-regions analysed: in the short run, a 10% increase in electricity prices leads to a decrease in net FDI inflows as a share of GDP by 0.4 percentage points for the south-western and 0.33 for the north-eastern region. In the long run, the response is 0.60 percentage points for south-western and 0.48 for north-eastern regions. Policies should aim at reducing electricity market price differences on the European level through investment in transborder transmission capacity; reductions in FDI, when environmental policy increases after-tax electricity prices, should be countered by other tax reductions as well as harmonization of property rights, absence of corruption and labour market regulations at best-practice level.     

The role of unemployment in wage determination: further evidence on the wage curve from Turkey

This paper presents an empirical estimation of the correlation between wages and regional unemployment rates in Turkey, more specifically it explores the role of regional unemployment rates in wage determination. The analysis builds upon a series of recent empirical studies on the wage-unemployment relationship, now commonly known as ‘the wage curve’, a downward sloping curve in wage-unemployment space. The existing studies are for most part in advanced market economies, while this paper presents one of the few attempts at a wage curve analysis within the context of a developing market economy. A cross-sectional estimation of micro level individual wage data for the Turkish labour market in 1994, suggest a statistically significant negative correlation between wages and regional unemployment rates. Separate regressions for men and women, however, show a wage curve to exist only in the male labour market. The study also presents the results on other variables of wage determination such as returns to schooling, returns to age, job tenure, gender, industrial and occupational affiliation of the worker, economic sector and union status.     

The exchange rate regime in Asia: From crisis to crisis

Prior to the Asian financial crisis, most Asian exchange rates were de facto pegged to the US Dollar. During the crisis, many economies experienced a brief period of extreme flexibility. A ‘fear of floating’ gave reduced flexibility when the crisis subsided, but flexibility after the crisis was greater than that seen prior to the crisis. Contrary to the idea of a durable Bretton Woods II arrangement, Asia then went on to slowly raise flexibility and reduce the role for the US dollar. When the period from April 2008 to December 2009 is compared against periods of high inflexibility, from January 1991 to November 1991 and October 1995 to March 1997, the increase in flexibility is economically and statistically significant. This paper proposes a new measure of dollar pegging, the “Bretton Woods II Score”. We find that Asia has been slowly moving away from a Bretton Woods II arrangement.     

The persistence in real exchange rate: Evidence from East Asian countries

In this article, we examine the degree of persistence in monthly real exchange rate of six East Asian countries in relation to their two major trading partners, the United States and Japan, to study the validity of PPP for the 1976:01–2009:03 period. To investigate the persistency in real exchange rate series, we use sum of the autoregressive (AR) coefficients and the confidence interval for it using grid-bootstrap procedure recently developed by Hansen (1999). We have two findings: first, we find evidence for high persistency in real exchange rate in terms of the Japanese yen for five countries and for four countries in terms of the US dollar the for the full and pre-crisis sample periods. Second, for the post-crisis period, the presence of low persistency in real exchange rate supports PPP for three countries in terms of the Japanese yen and five countries in terms of the US dollar. These findings indicate that real exchange rate series of five East Asian countries are mean-revert based on their exchange rate policies and East Asian countries can form a currency union.     

Re-examination of the long-run purchasing power parity: further evidence from Turkey

In this article, we re-examine the empirical validity of the Purchasing Power Parity (PPP) theory for the Turkish economy. For this purpose, an empirical model is constructed using some contemporaneous estimation techniques such as multivariate co-integration and vector error correction methodology. Our estimation results reveal that the PPP can strongly be supported as a long-run stationary steady-state relationship for the Turkish economy.