The behaviour of the US consumer price index 1913–2003: a study of seasonality in the monthly US CPI

This article analyses the seasonality in the monthly consumer price index (CPI) over the period January 1913 to December 2003. We examine three types of month effects: if the mean of monthly CPI changes of the entire data set, and of a given month were significantly different from zero; if the mean of monthly CPI changes of a given month was different from the mean of the other months; and if the variance of the monthly CPI changes for a given month was different from the variance of the other months. The mean of monthly CPI changes for the entire data set (0.27%) was found to be significantly greater than zero. The means of monthly changes show a downward trend from September to December. When the data are sliced into three sub-periods, we find an increasing trend in the means and medians of monthly changes but a decreasing trend in the SDs of the monthly changes. The mean of monthly CPI changes during the republican presidencies (0.15%) was significantly lower than during the democratic presidencies (0.38%).     

Determinants of the income velocity of money in Portugal: 1891–1998

This paper performs a long-run time series analysis of the behaviour of the income velocity of money in Portugal between 1891 and 1998 by assessing the importance of both macroeconomic and institutional factors and looking for particularities in the Portuguese case. We estimate two cointegration vectors for the income velocity of money, macroeconomic variables and institutional variables. It is apparent that one of these vectors reflects the relationship between income velocity and macroeconomic variables, while the other reflects the relationship between income velocity and institutional variables. Moreover, a regression analysis reveals that the usual U-shaped pattern is displayed with a relatively late inflection point located around 1970, which is consistent with the Spanish case. It is further noted that this is a feature of countries with a late economic and institutional development process.     

Segmentation of consumer markets in the US: What do intercity price differences tell us?

We quantify the magnitude of market segmentation in US consumer market and explore the underlying factors behind this segmentation, using a quarterly panel of retail prices for 45 products in 48 US cities from 1985 to 2009. The extent of market segmentation is estimated using city‐pair price differences within the framework of both linear autoregressive (AR) and nonlinear threshold autoregressive (TAR) models. We find that the magnitude of market segmentation varies from one product to another, but even more across city pairs in each product. Contrary to a widespread perception, market segmentation within the US is not necessarily larger for non‐tradable services compared to tradable goods. We identify potential drivers of market segmentation by relating the cross‐city and cross‐product variations of market segmentation to location‐specific and product‐specific characteristics—distance, relative city sizes, differences in wage and rent, type of product and proximity to marketplace. Distance, which captures more than transport costs, turns out to be the most salient factor even after controlling for a range of other potential factors. The effect of distance, however, varies substantially across products, with perishable products and locally produced products showing larger distance effect on market segmentation. We find that the magnitude of market segmentation has been somewhat stable during the sample period, but intercity price differences have become more sensitive to distance over time in many products under study.     

Consumer power and market control: Exploring consumer behaviour in affluent contexts (1946–1980)

Abstract

The aim of this essay is to present and explain the emergence and decay of two unorthodox views of consumer behaviour that developed from the mid-1940s to the mid-1970s: the view of the powerful consumer and the view of market control by producers. It begins by presenting their common origins in empirical studies that opposed the Keynesian-type analysis of consumption. While the first developed into the program of behavioural economics defended by George Katona of the Michigan Survey Research Center, the second nourished the contributions of authors like Galbraith (1958, 1967, 1977), Scitovsky (1954, 1962, 1976) and Mishan (1960, 1967).     

Price behaviour in European countries: testing the law of one price in the short– and long–run at various levels of aggregation

The objectives of this paper are to test the relaltive version of the law of one price in the short and the long run at various levels of aggregation for traded goods. The use of an error-correction model is made to test the validity of the hypothesis in the short run with a built-in tendency to one price in the long run. Using unit value trade data at the aggregate, 2-digit and 3-digit levels of the Standard International Trade Classification, the law of one price is generally rejected in the short run, although a long-run proportional relatlionship between prices of fairy homogeneous products are used the hypothesis is rejected both in the short and long run. This suggests that non-price changes which are likely to be incorporated in unit values are probably gradual and affect EEC countries in a similar manner. Price changes, however, are somewhat erratic and hence with unitvalue data, the law of one price in the long run is not contradicted, while it is refuted at the disaggregate level when price data are used.     

Forecasting US consumer price index: does nonlinearity matter?

The objective of this article is to predict, both in sample and out of sample, the consumer price index (CPI) of the US economy based on monthly data covering the period of 1980:1–2013:12, using a variety of linear (random walk (RW), autoregressive (AR) and seasonal autoregressive integrated moving average (SARIMA)) and nonlinear (artificial neural network (ANN) and genetic programming (GP)) univariate models. Our results show that, while the SARIMA model is superior relative to other linear and nonlinear models, as it tends to produce smaller forecast errors; statistically, these forecasting gains are not significant relative to higher-order AR and nonlinear models, though simple benchmarks like the RW and AR(1) models are statistically outperformed. Overall, we show that in terms of forecasting the US CPI, accounting for nonlinearity does not necessarily provide us with any statistical gains.     

Black and official exchange rates in Morocco: an analysis of their long-run behaviour and short-run dynamics (1974–1992)

Using Vector Error-Correction (VEC) model estimation on monthly data from Morocco for the period January 1974 to December 1992, this article tests the hypothesis that there is a long-run stable relationship between the official and the black-market exchange rates for US dollars. We also examine the short-run dynamics in the relationship between the two markets. The econometric results indicate that the two exchange rates are cointegrated. Furthermore, we reject weak exogeneity in the case of the official exchange rate, but fail to reject it in the case of the black-market rate. Granger causality tests show that the black-market rate causes the official exchange rate. The results seem to support the efficiency hypothesis, suggesting that participants in the black-market are able to anticipate changes in the official exchange rate. The findings also suggest that Morocco's decision (in January 1993) to introduce only current account convertibility and keep controls on capital accounts was wise.     

The Political Economy of Policy Reform in the Philippines: 1992–1998

Accurately measuring Turkey's informal sector is important for policymaking. We utilize household income‐expenditure surveys to examine this sector's income underreporting. The Pissarides‐Weber approach hypothesizes that data would reflect such underreporting as “excess food consumption”. Our results suggest informal sector members spend more than their formal sector counterparts with comparable reported income levels. Using this information, we estimate the average size of the true informal sector to be about 1.25 times the official estimate. The informal sector accounts for around 83% of officially reported disposable income. Therefore, true Turkish disposable income is (25%)?(83%), roughly 21% larger than the officially estimated magnitude.     

Earning functions in Portugal 1982–1994: Evidence from quantile regressions

This paper uses quantile regressions to describe the conditional wage distribution in Portugal and its evolution over the 1980s as well as the implications for increased wage inequality. We find that, although returns to schooling are positive at all quantiles, education is relatively more valued for highly paid jobs. Consequently, schooling has a positive impact on wage inequality. Moreover, this tendency has sharpened over the period. We also find that most of the estimated change in wage inequality was due to changes in the distribution of the worker's attributes, rather than to increased inequality within a particular type of worker. this version: January 2000     

Readings and translations of Karl Marx in Portugal (1852–1914)

This article presents an original and critical inventory of the most significant surveys, citations, discussions and translations made of Marx's works in Portugal up until the First World War.

The paper stresses the academic and political conditions under which Karl Marx's ideas were received in a European semiperipheral society and the specific interpretations that were made of those ideas.

It allows for the possibility of undertaking future studies comparing other national cases.     

The Golden Age of Tax Expenditures: Fiscal Welfare and Inequality in Portugal (1989–2011)

ABSTRACT

This paper studies social tax expenditures as an instrument of social policy, considering its broader social and political ramifications, particularly regressive distributive impacts, the targeting of social protection and making markets for non-state providers. Using OECD data and government budgets, we look at ‘tax breaks for social purposes’ in Portugal since the 1980s, with a focus on healthcare, educational and mortgage loan expenses. Portugal presents a comparatively high level of TBSP before the Great Recession. Why? Using Portugal as a theory-developing case, the paper argues that in the critical juncture following the late, double transition to democracy and structural economic reform, tax and welfare state developments combined to create social tax expenditures as a modality of targeted social expenditure favouring middle and higher strata. Once in place, a combination of powerful vested interests, obscure policy-making, regressive income distribution and high take-up rate across taxpaying groups obtained a path-dependent outcome, keeping inegalitarian and costly fiscal welfare growing during adverse fiscal conditions. Such a resilient outcome was curbed only in 2011 by the harsh conditionality of the economic and financial adjustment programme of the Portuguese bailout, an instance of how deep crises provide opportunities for path-shifting reconfigurations of social policy.     

Empirical issues in the computation of Stone–Lewbel price indexes in censored micro-level demand systems

In this article, we propose an empirical method for the computation of the Stone–Lewbel (SL) price index for product aggregates, when censored samples with zero expenditures are available from household budget surveys. The proposed technique is based on a regression imputation method that takes into account the price dynamics, therefore, allowing to disentangle the role of demographics from the role of prices in computing the SL index. Our simulations seem to indicate that our method is a valuable alternative.     

Disinflationary boom in a price–wage spiral model

This paper analyses the impact of the disinflation policy timing on the sign and the magnitude of the sacrifice ratio in a modified price and wage staggered model of Blanchard (1986). When wages are updated every four quarters and prices every two quarters, we show that a “cold-turkey” disinflation is associated to an output boom when the policy is implemented during the last period of life of the wage contract and a recession in the other quarters.     

Domestic prices of importable goods in Chile and the law of one price 1975–1982

This paper tries to explain observed deviations from the law of one price in Chile during the 1975–1982 period. In order to do this, we develop a microeconomic model where typical final goods are non-tradeable, and are produced by combining tradeable (importable) goods and commercial (or intermediation) services. The empirical results reported later in the paper tend to support our model and are consistent with the hypothesis that an important proportion of variations in retail and wholesale prices of selected imported goods is explained by changes in the cost of domestic distribution. A very important implication of our findings is that it would not make sense to invoke disaggregated perfect commodity arbitrage to support the assumption of purchasing power parity at the macro level.     

Stabilizing consumer choice: the role of ‘true dynamic stability’ and related concepts in the history of consumer choice theory

Abstract

It is often argued that the inability of Arrow–Debreu general equilibrium theory to produce an adequate proof of the stability of the Walrasian price adjustment mechanism was one of the program's most significant failures. This paper will not question this standard interpretation of the history of general equilibrium theory, but makes the case that characterizing the ‘stability’ question in terms of market stability– in particular the stability of the equilibrium price vector in the Walrasian general equilibrium model – actually helped to stabilize the standard model of consumer choice in general equilibrium theory and elsewhere within microeconomics. The problem of the stability of ‘consumer's equilibrium’ was much discussed early in the twentieth century, and it has recently re-emerged in a different guise as the ‘endowment effects’ and ‘reference dependencies’ of contemporary behavioral economics, and yet it disappeared from mainstream discussion during the period 1950 to 1980. This paper argues that shifting the discussion from the intra-agent stability of the individual consumer to the inter-agent stability of the competitive market contributed – despite its ultimately negative impact on general equilibrium theory – to the long period of stable normal science consumer choice theory enjoyed during the middle of the twentieth century.     

Cost–effectiveness of adding ezetimibe to atorvastatin vs switching to rosuvastatin therapy in Portugal

Abstract

Background:

Statin monotherapy is the mainstay of low-density lipoprotein cholesterol (LDL-C) management for high cardiovascular risk patients in Portugal; however, several therapeutic options are available and predicted to have different clinical and economic impacts. The aim of this study was to evaluate the cost-effectiveness of adding ezetimibe 10?mg (EZ10) to atorvastatin 10 or 20?mg (A10/20) vs switching to rosuvastatin 10 or 20?mg (R10/20) in Portuguese patients with coronary heart disease (CHD) and/or diabetes who are currently above the LDL-C goal.     

Conditional price volatility,speculation, and excessive speculation in commodity markets: sheep or shepherd behaviour?

The present study aims to investigate the dynamics of primary commodity spot prices and the role of speculation for the period 1995–2012. Using a linear and nonlinear Granger causality analysis, the relationship between speculation and GARCH conditional price volatility on the one side, and the linkage between excessive speculation and GARCH conditional price volatility on the other side, is carefully examined with the scope to establish whether volatility drives speculation or speculation drives price volatility, or whether there are no linkages between the two variables. The results show that excessive speculation leads conditional price volatility, and that bilateral relationships often exist between price volatility and speculation. In addition, the lead-lag relationships are not found for the entire sample period, but rather when small sub-periods are taken into account. It turns out, in fact, that excessive speculation has driven price volatility for maize, rice, soybeans, and wheat in particular time frames, but the relationships are not always overlapping for all considered commodities. Generally, the results under linear causality tests are in agreement with those obtained under nonlinear counterparts.     

Study on the measurement of China’s financial intermediation ratio in terms of stock: 1992–2006

In terms of China’s financial intermediation ratio (FIMR) in stock, we make a thorough empirical study on the change of the ratios during 1992–2006. We find that: The monopoly position of bank credit in the financing channel of non-financial sector is weakened, but bank credit is still the most important financing channel for non-financial sector. There is a structure change in the financing channel of government sector and its FIMR is increasing. Though the scale of non-banking financial institutions underwent rapid development during 1992–2006, their role in social financing cannot be evenly matched with banking system. It is the change of various economy behaviors that induce the changes of FIMR in China.     

Consequences of Hodrick–Prescott filtering for parameter estimation in a structural model of inventory behaviour

Much work in macroeconomics relies on detrending a time series prior to analysis. A popular method of detrending has been the Hodrick–Prescott (HP) filter. This filter has been widely applied in the Real Business Cycle literature to isolate the behaviour of economic variables at business cycle frequencies and to look at comovements between series over the business cycle. Prior work has shown that the use of this filter can have serious consequences for such analysis, such as inducing spurious correlations, and that a researcher should proceed with caution when applying the filter. Another use of HP filtering has been to achieve stationarity prior to estimation of structural econometric models. Little work has been done concerning the possible effects this method of detrending may have on parameter estimation from such models. Given the problems with the filter noted in the literature, it is likely these effects may be of some consequence to estimation results. Using a common model of inventory behaviour, a simulation study is conducted to assess the impact of using the HP filter for detrending prior to estimation. A comparison will be made to other methods of handling trend to gauge relative performance.