INFLATION ACCOUNTING FOR THE FEDERAL REPUBLIC OF GERMANY RESULTS USING DIFFERENT DEFLATOR PRICE INDICES

The purpose of inflation accounting as proposed by Jack Hibbert¹ is to show the changes in purchasing power of the assets and liabilities by sectors resulting from general price movements. This paper shows the results of inflation accounting for the Federal Republic of Germany on the basis of complete balance sheets for the sectors "Private households,""Enterprises,""General government" and "Rest of the world" in 1980. It is evident that the results of inflation accounting depend to a high degree on the kind of price index which is used as an indicator of the changes in the purchasing power of money in general. The price index for inflation accounting should in general be selected according to the aim of the analysis. On the other hand, however, the validity of the results of inflation accounting depends on and is limited by the price index chosen for that purpose. The figures presented also show that the results of inflation accounting depend to a high degree on whether estimates of the value of tangible assets are included or not. This holds for reproducible tangible assets as well as for land.     

A prototype model of the foreign exchange market of Canada: Forecasting capital flows and exchange rates

A balance-of-payments structural model of the foreign exchange market of Canada, endogenizing capital flows, the spot and forward exchange rates and the entities of the monetary sector, is developed using quarterly data for 1971–81. The capital flows have been disaggregated into ten categories and the exchange rates of the Canadian dollar have been analysed against five major currencies. While the model does not adhere strictly to purchasing power or interest rate parity, it does recognize them and it also incorporates other economic fundamentals, expectations and risk. Government interventions, although generated endogenously, are quantified implicitly and globally. The model tracks the post-Bretton Woods in-sample experience and generates ex post predictions reasonably well.     

The purchasing power parity of Southeast Asian currencies: A time-varying coefficient approach

The economies of Southeast Asia have undergone several structural changes, including the Asian currency crisis, during the post-Bretton Woods era. We use a time-varying coefficient cointegration model to test for purchasing power parity (PPP) of Southeast Asian currencies and to track changes in purchasing power relationships over time. The main empirical findings are as follows. First, the stability of the relationship between exchange rates and price differentials is strongly rejected. Second, a major structural change occurs at the outbreak of the Asian currency crisis in 1997. Third, when the cointegration vector is allowed to vary with time, we find evidence of a cointegration relationship for four countries in terms of the US dollar and for four countries in terms of the Japanese yen. Therefore, it seems unlikely that Southeast Asian currencies form a “yen bloc.”     

CURRENT COST ACCOUNTING: IMPLICATIONS FOR THE DEFINITION AND MEASUREMENT OF CORPORATE INCOME

This paper is in 7 sections. Section 1 gives as background a chronological account of the steps taken in the United Kingdom, from 1974 to late 1977, towards the development of a new system of accounting in company reports which would allow for the effect of changing costs and prices on the measurement of profit and of capital employed in the business. Section 2 discusses the main features of the system, known as current cost accounting, as it is seen in the United Kingdom. Section 3 surveys the relationship between current cost accounting and the national income and expenditure statistics, and the likely implications of the introduction of current cost accounting upon the quality of macro-economic statistics, including estimates of national and sector balance sheets. Section 4 describes some of the problems of implementing current cost accounting, particularly in special situations, and outlines the solutions which were proposed in the "Exposure Draft" published in 1976 by the accountancy profession in the United Kingdom. Section 5 considers the definition of distributable profit in relation to the need to maintain capital, considering the concept of gain, the system of valuing assets and liabilities, and the enterprise's capacity to take on additional debt as a means of financing its assets. Section 6 briefly surveys the implications for taxation, price control and price setting. Section 7 concludes by surveying the scene at the end of 1977 and by looking at likely future developments.     

Purchasing Power Parity in the Transition: The Case of the Romanian Leu Against the Dollar

This article uses co-integration analysis to test purchasing power parity for the Romanian leu against the US dollar. The fact that the purchasing power parity (PPP) hypothesis is not rejected leads to the conclusion that the real appreciation of the leu against the dollar over the transition has not been due to an appreciation of the equilibrium real exchange rate. Rather it is simply the consequence of the leu being devalued beyond the equilibrium level at the start of reform and slowly returning to its constant equilibrium real rate. There is evidence that the adjustment to equilibrium has fallen almost entirely on the price level, so that a major consequence of the excessive undervaluation has been higher inflation.     

Measurement of diverse,irreversible capital

This paper revisits capital measurement through a microeconomic analysis of a simple project consisting of diverse types of irreversibly invested capital. Capital is aggregated using the numeraire. Thus, the proposed method of measurement is a form of accounting. It associates all types of capital in a common framework. Under certainty, user cost and depreciation take internal accounting values that obey three axioms that comprise five conditions. The accounting values proliferate, but they have only a limited relation to market prices or shadow prices. Each type of capital earns the market rate of interest. In practice, under uncertainty, calculation of the accounting values would require projections of basic data, and would be hard to comprehend, especially for outsiders, and would leave room for moral hazard. Because of these obstacles, accounting practice departs from the ideal based on cash flows and strictly limits choice by using prescribed schedules of depreciation. These schedules are interpreted from an economic perspective.     

Purchasing Power Parity: A Time Series Analysis of the U.S. and Mexico, 1995–2007

This paper presents indirect evidence that absolute purchasing power parity (PPP) may hold in the long-run between Mexico and the U.S., but due to data limitations, the relationship could not be tested directly. Thus it is not clear if absolute PPP holds in the long run between the U.S. and Mexico. Given that relative PPP is a necessary, but not sufficient, condition for absolute PPP to hold, this study tests the relationship between the change in the log of the exchange rate, and the changes in the log of the U.S. producer price index (PPI) and the Mexican PPI. Here, the absence of relative PPP would indicate that absolute PPP could not hold. Given that all the relevant variables in first difference log are stationary, PPP in its relative form holds and OLS can be applied directly in a VAR model setting, viz., treating all variables initially as potentially endogenous. The estimates indicate one-way Granger causality from the percentage change in the exchange rate to the percentage change in the Mexican price level, which is not an implausible result for an emerging nation such as Mexico which imports a significant fraction of (dollar denominated) intermediate products and capital inputs.     

The Canadian Dollar and Purchasing Power Parity during the Recent Float

This paper re-examines the purchasing power parity (PPP) concept for five bilateral Canadian dollar exchange rates. The Johansen cointegration technique is employed. Evidence is found in favor of PPP when wholesale prices are used but not when consumer prices are utilized; whereas, in all but one case, it is not possible to reject the symmetry and proportionality hypotheses. Furthermore, it is shown that the dimension of the cointegration space may exhibit sample dependency, but the estimated coefficients are stable in recursive estimations. Finally, by implementing the multivariate KPSS test for the null hypothesis of cointegration, Johansen's results are overturned.     

Long-term trend and short-run dynamics of the Canadian dollar: an error correction modelling approach

Using quarterly data for 1972–2000, the paper examines the long-term and short-term movements of the US-Canadian exchange rate. It is found that the standard purchasing power parity condition fails to explain movements of the Canadian dollar. The explanatory power of the model increases significantly when resource commodity prices are added to the equation. Short-term movements in the Canadian dollar are influenced by the interest rate differential between Canada and the USA.     

GROWTH ACCOUNTING AND PRODUCTIVITY MEASUREMENT*

This paper compares the growth accounting approaches to aggregate productivity measurement and analysis of three major researchers: E. F. Denison, D. W. Jorgenson, and J. W. Kendrick. The investigetors are compared in terms of their treatment of a number of crucial elements, including measurement of output and of capital and labor inputs (including composition or quality changes), total factor productivity growth, economies of scale, and intensity of demand (for output). Judged by the standard of the neoclassical economic theory of production-the only generally accepted basis for input aggregation-Denison departs significantly from the production theory framework in his measurement of output and capital input, Kendrick to some degree in his measure of capital input, and Jorgenson not at all. The effects of these departures are illustrated with reference to the recent productivity slowdown. The probable near-term future utility of growth accounting methods for productivity analysis is assessed, and some related econometric modeling issues are noted.     

THE IMPACT OF CAPITAL GAINS ON THE DISTRIBUTION OF INCOME IN BELGIUM

In an earlier paper, we presented estimates of capital gains for a number of categories of assets owned by Belgian households. The purpose of the present paper is to see how the distribution of disposable income between socio-economic groups is modified when one adopts a "broadened" definition of income which includes capital gains corrected for losses of purchasing power.
The main result of the study is that at current prices, the adoption of a broadened definition of income strongly increases disparities between socio-economic groups. However, when one takes into account losses in purchasing power, conclusions differ according to the period analyzed. For the years 1953–68, it appears that the distribution of broadened disposable income is more unequal than the distribution of disposable income. For the years 1969–77 when inflation was high, the adoption of a broadened definition of income has reduced disparities, with the important exception of old age pensioners.     

Examining the evidence of purchasing power parity by recursive mean adjustment

This paper revisits the empirical evidence of purchasing power parity under the current float by recursive mean adjustment (RMA) proposed by So and Shin (1999). We first report superior power of the RMA-based unit root test in finite samples relative to the conventional augmented Dickey–Fuller (ADF) test via Monte Carlo experiments for 16 linear and nonlinear autoregressive data generating processes. We find that the more powerful RMA-based unit root test rejects the null hypothesis of a unit root for 16 out of 20 current float real exchange rates relative to the US dollar, while the ADF test rejects only 5 at the 10% significance level. We also find that the computationally simple RMA-based asymptotic confidence interval can provide useful information regarding the half-life of the real exchange rate.     

Do exchange rates affect the capital–labour ratio? Panel evidence from Canadian manufacturing industries

Using industry-level data for Canadian manufacturing industries from 1981 to 1997, we find empirical evidence of a negative relationship between the capital–labour ratio and the user cost of capital relative to the price of labour. A 10% increase in the user cost of the Machinery and Equipment (M&E) relative to the price of labour results in a 3.3% decrease in the M&E–labour ratio in the long run. Assuming complete exchange rate pass-through into imported M&E prices, the maximum effect of a permanent 10% depreciation in the exchange rate is a 1.7% decline in the M&E–labour ratio. This result implies that the cumulative growth of the M&E–labour ratio during the 1991 to 1997 period would have been 2.3 percentage points higher had the dollar not depreciated. This may appear to be significant, but considering both M&E as a share of total capital and the capital share of nominal output are both approximately one-third, in terms of a simple growth accounting framework, the effect on labour productivity is small.     

Fundamentals at Odds? The US Current Account Deficit and Dollar

In mid‐2008, the real effective exchange rate (REER) of the dollar was close to its minimum level for the past four decades. At the same time, however, the US trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of US external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help to reconcile them. It focuses in particular on the terms of trade, adjustment lags and measurement issues related to both the REER and the current account balance.     

明代GDP及结构试探

本文尝试利用现代国民经济核算方法研究明代GDP及其构成.利用历史文献提供的数据,并借鉴前人定量研究的成果,我们整理和估算了1402-1626年的明代主要经济变量,进而对明代经济进行总体描述,并和工业革命前的英国经济相比较.主要结论如下:明代整体经济增长不快,年均GDP增长率为0.29%;总经济规模有所增长,人均年收入没有明显变化,维持在平均6公石(391公斤)小麦上下;以1990年美元计值的人均收入平均为230美元,最高的年份也不到280美元;农业占GDP比重平均为88%,手工业和商业最高时也没有突破20%;政府税收与GDP之比为3%到9%,平均为5%,明中叶后军费开支占中央政府支出的60%到90%;年均积累率低估值为5.3%,高估值为9%.     

The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time‐Series Analysis

This article analyses the effects of the real value of the dollar on investment in US domestic manufacturing using aggregate data for 1973–2004. Econometric estimation shows a negative effect that is much larger than has been found in any previous study. The exchange rate affects investment mainly, although not exclusively, through the channel of financial or liquidity constraints, rather than by affecting the desired stock of capital. Counterfactual simulations show that US manufacturing investment would have been 61% higher and the capital stock would have been 17% higher in 2004 if the dollar had not appreciated after 1995.     

THE TREATMENT OF EDUCATION IN NATIONAL ACCOUNTING1

It is argued that the conventions of an accounting system, such as the S.N.A., are a matter of convenience. The treatment of education as a current expenditure, instead of as a form of capital formation, derives from the Keynesian system, and is not appropriate for dynamic problems of developing countries, where weaknesses in education are often the main “bottleneck” in the process of development. In such countries, expenditure on education clearly yields its benefits mainly in the longer run. To treat this as a consumption item biases policy in the direction of using financial resources for fixed capital rather than human investment, and may cause aid agencies to penalize countries which expand their educational systems. A similar problem arises on other expenditures such as health, but the case for treating them as investment is not so strong. To treat educational expenditure as part of capital formation logically requires two major changes. First education needs to be removed from private and public consumption, and for this purpose a fairly broad definition of what is education should be used. Secondly, the stock of educational capital should be valued. The valuation problems are, however, severe. Variations in cost components make historic cost of little value as a yardstick, and calculations of future returns are fraught with difficulties. Using replacement costs, which seems the best method, involves the construction of education profiles in physical terms which can then be valued by present or by standardised costs. The depreciation of human capital through mortality and retirement can be allowed for by applying national average rates to these physical profiles. Switching educational expenditure from current to capital accounts involves no serious practical problem. However, although there should logically be an allowance for depreciation on human capital, this is not recommended; single monetary measures of educational stock are not very meaningful, and this would involve changing the definition of “net” aggregates. Development of statistics of educational stocks and flows in physical terms—the beginnings of “demographic accounting” fully integrated with the rest of national accounting—is strongly advocated.     

A COMPARISON OF POUND STERLING-AUSTRALIAN DOLLAR PURCHASING POWER PARITIES FOR SELECTED POPULATION SUB-GROUPS IN AUSTRALIA AND THE UNITED KINGDOM1

This paper utilizes Household Expenditure Survey and Consumer Price Index data supplemented by private survey data in an attempt to compare the purchasing power parities of the pound sterling and the Australian dollar for a range of population sub-groups in the United Kingdom and Australia. In spite of the close political, economic, social and cultural ties that exist between these two countries, there have been no attempts to measure differences in living costs and real expenditures. Further, Australia has not been a party to the International Comparisons project of the Statistical Office of the United Nations. This study derives purchasing power parities which explicitly account for variations in expenditure patterns of different population sub-groups. For example, a household living in London intending to move to Sydney will find it useful to have a comparison of cost-of-living between households living in these two cities which takes into account explicitly the general expenditure patterns in these two cities. Due to the nature of the data, it was necessary to employ a new index number method derived by one of the authors.     

PROBLEMS OF COMPARISONS IN AFRICA WITH SPECIAL REGARD TO KENYA

In order to obtain the information needed to include Kenya in an international comparison of income and purchasing power, it was necessary to collect some data to supplement the regularly collected statistics. Special collection was particularly important for capital goods prices and rural consumer goods prices. The remainder of the work involved using unpublished data available from the Kenyan Statistical Division, either to obtain additional detail required by the comparison, or to maintain international consistency in concept and estimating procedures.