Corn-price rises and equalisation: Real wages in stockholm 1650–1719

Abstract

The period between the price revolution of the sixteenth century and the long inflation which set in around 1730 was marked over large tracts of Europe by stable or even falling prices and rising real wages.¹ The features of stagnation and defensive adaptation are often pointed out by way of contrast with the pronounced economic and demographic expansion of the preceding and succeeding periods.²     

Monetary discipline and inflation in developing countries: the role of the exchange rate regime

Adherence to a pegged exchange rate regime has the potentialto affect inflation in two ways: by instilling monetary disciplineand by altering the relationship between money and prices, becauseshocks to the money stock are absorbed partly by changes inthe balance of payments. Although the latter is a disequilibriumphenomenon (if balance of payments deficits are unsustainablein the long run), it might still be important in the mediumterm. Evidence on the relative importance and magnitude of thetwo effects is presented, using cross-sectional macroeconomicdata from 80 LDCs. Both effects are found to be significant.     

Inflation,interest rates,and the balance of payments during a financial reform: The case of Argentina

In order to evaluate the impact of recent financial reforms on the Argentine economy, this paper presents the results of estimating a small, monthly structural model of the Argentine economy which emphasizes the linkages between the financial system, inflation and the balance of payments. The results are used to examine the portfolio interest rate elasticities of both the financial and non-financial sectors, the determinants of the real levels of and spread between the loan and deposit interest rates, and the responsiveness of inflation and the balance of payments to various policy measures.     

Spoils of War: The Political Legacy of the German hyperinflation

I study the link between monetary policy and electoral outcomes by linking new data on the 1923 German hyperinflation and the vote share of the main parties of Weimar Republic from 1924 to 1933. Exploiting cross-sectional variation in prices in over 280 cities, I find that inflation predicts the vote share of the Volksrechtspartei, an association-turned-party of inflation victims, and positively correlates with the Communists in the 1932 elections. Hyperinflation also leads to a decline in turnout, with a loss of confidence in the German institutions. However, contrary to received wisdom, areas more affected by inflation did not see a higher vote share for the Nazi party. Results are robust to a range of specifications, including models in differences, panel data with fixed effects, Coarsened Exact Matching estimation, Conley standard errors, and an instrumental variable strategy.     

The sixteenth‐century price rise: new evidence from Scotland, 1500–85

This article contributes to the emerging belief among early modern economic historians that sixteenth‐century inflation was primarily caused by monetary factors. The Scottish case study reveals a strong relationship between coinage debasement and rising prices, a contention strengthened by the fact that the Scottish experience of inflation was high in European terms, and, in particular, stands at a considerable distance from the English pattern. This study includes the first scholarly examination of prices during the 1540s, and reveals that substantial inflation first emerged during this hitherto neglected decade. Prices plateaued during the 1550s, and rose consistently from 1560 to 1585. Meanwhile real wages declined during the 1540s and from 1560 onwards. This article is methodologically innovative in constructing two baskets of commodities, designed to represent the elite experience, alongside a more traditional basket based on a working household. These reveal the divergent experiences of the price rise within Scotland: rising prices hit the poor harder than the rich due to the high cost of domestic agricultural goods in the subsistence basket and the deflationary impact of wages and luxury goods upon the overall elite basket.     

Determinants of Malaysian Trade Balance: An ARDL Bound Testing Approach

Abstract

This paper examines the short- and long-run relationships between trade balance, real exchange rates, income and money supply in the case of Malaysia. The inclusion of income and money variables in the study is purposely to examine the monetary and absorption approaches to the balance of payments beside the conventional approach of elasticity, using exchange rates. Using the bound testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework, we investigate whether a long-run equilibrium relationship exists between trade balance and the determinants. Additionally, we adopt an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF) for further inferences. Using this approach, we find evidence of a long-run relationship between trade balance and income and money supply variables but not between trade balance and real exchange rate. The findings also suggest that Marshall–Lerner condition does not hold in the long-run for Malaysia and for policy wise the Malaysian trade balance/balance of payments should be viewed from absorption and monetary approaches.     

Asset Market and Balance of Payments Characteristics: An Eclectic Exchange Rate Model for the Dollar,Mark and Yen

In this paper we use an exchange rate model, which combines asset market characteristics with balance of payments interactions, to examine the nominal effective exchange rates of the German mark, Japanese yen and US dollar for the recent experience with floating exchange rates. Our approach may be interpreted as one which attempts to flesh out the missing links that arise in conditioning an exchange rate solely on relative prices, as occurs in a standard PPP analysis. Amongst the results reported in this paper are: significant, and sensible, long-run relationships for the currencies studied; complex short-run dynamics; a variance decomposition analysis which apportions nominal exchange rate error variances into real and nominal elements.     

Inflation in a newly industrialized country: The case of Korea

This paper investigates the nature and causes of inflation in Korea, a newly industrialized country. The basic framework is the two-way causation between prices and wages. The estimated results show that the postulated hypotheses are upheld and that there are multiple causes of inflation. In particular, capital and material costs, which may be considered as external factor costs in Korea, play a significant role, implying that the impact of external inflation on internal inflation in a rapidly developing country is substantial.     

The Exchange Rate and the Monetary Transmission Mechanism in Germany

For the conduct of monetary policy under floating exchange rates it is important to understand the role of the exchange rate in the monetary transmission mechanism (MTM). The timing and the magnitude of the effects of a change in the exchange rate on output and inflation may be quite different from traditional interest rate channels, thereby affecting optimal policy. In this paper we examine the exchange rate channel in the MTM in Germany by estimating an identified VAR model. Two features of the results are highlighted. The effect of a policy shock on the exchange rate accelerates the pass-through of policy into prices and leads to a different response of the various components of GDP. We then show that these qualitative effects can be duplicated in a general equilibrium model for a semi-small open economy with sticky prices and wages that is calibrated to capture the main features of the German economy.     

Prices and industrial transformation

Abstract

One of the contradictions of neo-classical economic theory concerns its view of relative prices. On the one hand it is relative prices that determine the market's equilibrium position and decide what transactions will take place. On the other hand, the pattern of relative prices, or expressed differently the price structure, has been regarded as more or less immutable. Variations in relative prices have been considered short-term phenomena, after which, in time, an adaptation has taken place which has restored the initial situation. The same line of thought was also held by Wesley Mitchell, who in the dispersion of relative prices found a reflection of business cycles, but he maintained that the price system is “yet stable in the essential balance of its interrelations”.¹ F.C. Mills cited Mitchell as his authority in his comprehensive work The Behavior of Prices, and although he felt compelled to raise objections to the inference that relative prices varied rhythmically with the business cycle, he still considered that there was a limit to change in relative prices, i.e. the price structure had a fundamental stability.²     

Inertial linkages between wages and inflation: Evidence from Brazil

Many observers of the Brazilian economy have suggested that wage growth causes inflation. Because wage growth is linked to past price growth, an inertial component is said to exist. The relationship between wage growth and inflation in Brazil over the period 1981–89 is examined. A model of wage growth and inflation is developed. Lagged effects of inflation on wage growth and a structural break in 1986 are tested for. The estimates suggest a lagged response of wages to prices in the pre-1986 period. However, in the post-1986 period, the response of wages to lagged inflation is not statistically different from zero and the contemporaneous response is not different from one.A preliminary version of this paper was presented at Fundacão Getulio Vargas and CEBRAP in São Paulo in August 1991. The author wishes to thank Tomàs Malaga, Carola Lame, Gesner Olivera, and Luis Bresser Periera for helpful comments. As well, the author wishes to acknowledge some critical input from Ann Witte and Alejandra Edwards. All errors, however, are the author's own.     

Balancing the Baltic trade: colonial commodities in the trade on the Baltic, 1773–1856

Abstract

This article attempts to look at the connection between the Atlantic and the Baltic economies during the transition from early modern to the modern era. Previous research has seriously underestimated the importance of colonial commodities traded on the Baltic during this period. Colonial commodities, particularly from the American plantation complex, became ever more important for the Western European balance of payments on the Baltic. Already by the late eighteenth century, these commodities were on aggregate worth approximately as much as the exports of strategic commodities such as grains or iron from the Baltic at the same time. By the middle of the nineteenth century, the value of colonial commodities imported to the region far surpassed the value of such key exports from the Baltic. The colonial commodities thus constituted an important part of the balance of payments for the trade on the Baltic.     

Purchasing Power of Labour: Norwegian Real Wages, 1726–2006

Abstract

By utilizing data from one of the largest international historical archives on wages and prices, this article offers new nominal and real wage series for Norway, 1726–2006. These serve as measures for the purchasing power of labour as input to production. The new series cover all main industries and thereby enables solid conclusions. The new series challenge existing views on the development of the purchasing power of labour in Norway during the last three centuries.     

INFLATION IN SOUTH AFRICA: A TIME‐SERIES VIEW ACROSS SECTORS USING LONG‐RANGE DEPENDENCE

In this paper I examine the time‐series evolution of the log consumer price index series in South Africa, disaggregating the data by sectors. I examine the time period 1990m1‐2008m12, i.e. focusing on the post‐apartheid period. I used methodologies based on fractional integration using parametric and semiparametric techniques. The results indicate that the (total) inflation rate in South Africa is long memory, with an order of integration in the range (0, 0.5). The same happens with most of the data disaggregated by sectors with values of d above 1 in the log prices. Evidence of I(0) inflation is obtained in some cases for “fruits and nuts”, “vegetables” and “sugar”, and evidence of mean reversion in the log prices is only obtained in the case of “fish and other seafood”.     

Russian real wages before and after 1917

The paper measures real wages in St Petersburg, Moscow, and Kursk over 1853-1937. Workers in construction and large scale industry are studied. For the imperial period and the NEP, new series of prices are collected from archival and printed sources, and these radically revise previous measures of inflation. Russian living standards grew little between 1853 and 1913, but doubled between 1913 and 1928 due to the exchange rate, price, and employment policies followed by the regime. Real wages dropped to their pre-War level between 1928 and 1937, as the social surplus was mobilized for the industrialization drive.     

De gevolgen van de directe prijsbeheersing voor de internationale handel

Summary This paper contains a theoretical analysis of how a maximum price being put on homogeneous commodities affects international trade if rates of exchange are fixed. The consequences of a calculation scheme for fixing prices of differentiated products are also investigated.A maximum price that is lower than the import price is an impediment to import. This leads to oscillations of the import price if demand in the importing country is sufficiently high. The maximum price has no influence if it is higher than the import price. A maximum price that is equal to the export price (which is independent of the supply of the exporting country) retards the decline of export that would occur in consequence of a rise in home demand or a rise in costs of production. As soon as the average revenue per unit of product exported exceeds the maximum price, suppliers will try to export as much as possible. Importation of substitutes is stimulated indirectly and exportation of substitutes is discouraged, whereas the opposite effects occur with respect to complementary goods, materials used in the production process, and goods for the production of which the same materials and factors of production are used.If demand rises, a calculation scheme used for price control will reduce imports and stimulate exports. The calculation scheme reacts only on rises in costs of production that are not recognized officially by the government: imports will be smaller, and exports higher, than in the case of a free determination of prices. Calculation schemes check the importation of substitutes and stimulate their exportation, whereas the opposite effects may occur with respect to complementary goods, or due to changes in the production.In case of a general control of prices when inflation prevails, the whole set of price effects will affect the balance of payments. However, the final result will be uncertain, since some price effects tend to enhance the surplus of the balance of payments whereas others tend to reduce it. At the same time, income effects may affect the balance of payments in the adverse sense.National price control impedes the optimum allocation of resources in an economic community. This is due to the fact that it distorts trade.     

Slow Pass-through Around the World: A New Import for Developing Countries?

Developing countries traditionally experience pass-through of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors’ products, and the general CPI. But developing countries in the 1990s experienced a rapid downward trend in the degree of pass-through and speed of adjustment, more so than did high-income countries. As a consequence, slow and incomplete pass-through is no longer exclusively a luxury of industrial countries. Using a new data set—prices of eight narrowly defined brand commodities, observed in 76 countries—we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the pass-through coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in pass-through to imported goods prices, and in turn to competitors’ prices and the CPI, can be explained by changes in the monetary environment—including a fall in long-term inflation. Real wages work to reduce pass-through to competitors’ prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the pass-through coefficient in some developing countries.     

Exchange Rate Pass-through,Unemployment and Optimal Implementable Monetary Policy Rule for Emerging Economies

Abstract

This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of exchange rate pass-through for monetary policy in emerging countries. I find that, with complete exchange rate pass-through, the optimal policy rule features unemployment targeting as well as inflation targeting. However, the welfare gain from responding to unemployment fluctuations diminishes as the rate of exchange rate pass-through to import prices decreases. With low exchange rate pass-through, the optimal monetary policy is strict inflation targeting.     

(De-)Stabilizing two-country macroeconomic interactions in an estimated model of the U.S. and the Euro Area

In this paper a semi-structural macroeconomic model based on gradually adjusting wages and prices and hybrid, cross-over inflation expectation formation is analyzed and estimated with aggregate data of the U.S. and the Euro Area. Besides comparing, among other things, the determinants of the wage- and price inflation dynamics in both economies, the role of different macroeconomic transmission channels for the stability of the two-country system is investigated.