Patterns and Determinants of Price Changes: Analysing Individual Consumer Prices in Austria

Abstract. We provide empirical evidence on the degree and characteristics of price stickiness in Austria by estimating the average frequency of price changes and the duration of price spells from a large dataset of individual price records collected for the computation of the Austrian consumer price index. The mean (median) duration of price spells in Austria amounts to 14 (11) months, but there is considerable heterogeneity across sectors and products. We find that price increases occur only slightly more often than price decreases. For both directions, the average magnitude of price changes is quite large (11% and 14%, respectively). The introduction of the euro cash in January 2002 led to more frequent but, on average, smaller price adjustments than usual. Estimating the probability of a price change in a panel probit model, we find a small but positive effect of the price spell duration on the incidence of price changes. Furthermore, product‐specific inflation, the size and the sign of the last price change and the period of the euro introduction significantly affect the probability of a price change.     

Labor Market Institutions and the Role of Elites in Flexicurity Societies

The paper argues that a process of capital accumulation exhibiting recurrent mass unemployment—due to the conflict over income distribution—does not represent a process that is adequate for a democratic society in the long run. The paper develops a basic macrodynamic framework where this process of cyclical growth is overcome by an ‘employer of first resort’ (an entity that provides employment security but not job security), added to an economic reproduction process that is highly competitive (flexible). Such a flexicurity system is characterized by high labor and capital mobility, with fluctuations of employment in the private sector made socially acceptable through a second labor market where all remaining workers are able to find meaningful occupation and sufficient income. We study on this basis a disaggregation of the labor market into skilled and high-skilled labor, as well as professional and political elites. The stability and sustainability propositions of the homogeneous labor case generalize to this extended situation.     

Domestic concentration,foreign trade and economic performance

In a competitive fringe model the impact of concentration on price-cost margins can be shown to be ambiguous. Therefore, looking at the relationship between rates of return and concentration ratios is not sufficient for perceiving collusive elements. In this paper a model is set up that permits discerning collusion more clearly. Additional evidence concerning collusion can be gained by analyzing the influence of exports and imports on price-cost margins. Applying this approach to West Germany yields the result that the collusiveness prevailing in domestic markets has not visibly decreased in spite of a substantial increase in foreign trade.     

Currency Invoicing in International Trade: an Empirical Investigation

The authors investigate the choice of currency of invoicing in international trade under exchange rate fluctuations. Predictions derived from a model developed by Donnenfeld and Zilcha in 1991, and others, regarding the optimal choice of currency of invoice are tested for imports into Canada. The authors employ a unique dataset from Customs Canada that covers a six-year period and lists all currencies used for invoicing by industry. The empirical results support the hypothesis that there is a positive relationship between the extent of invoicing in the importer's national currency and exchange rate risk, and a negative relationship between invoicing in the exporter's currency as well as invoicing in a third currency and exchange rate risk. The empirical results further indicate that relative size of a country plays a role in determining the currency of invoicing.     

MORE WEASEL WORDS: oxymora and pseudonomasia

Sir Alfred Sherman, distinguished journalist and founder of the Centre for Policy Studies, defines and attacks further 'weasel words'.     

The Impact of Accounting Earnings Disclosures on Stock Prices in Singapore

This paper reports the relationship between earnings and share prices. The results show that unexpected earnings changes are significantly associated with share price changes. However, the strength of the earnings effect is not as pronounced as those reported in the more analytically-intensive developed stock markets. The results are adjusted for risk differences by using a non-synchronous correction procedure to remove thin-trading bias.     

Monetary policy in the euro area: Was it too tight in the 1990s?

This paper studies the monetary policy in the euro area. An important question concerning the euro area is whether the monetary policy has been too tight in the 1990s and in turn, caused the high unemployment rates, in contrast to the economic prosperity and low unemployment rate of the U.S. Therefore, the authors explore what would have happened to the euro economy if the Central Banks had followed either the fixed or time-varying monetary policy rule of the U.S. The paper does find that the European central banks and then later the ECB overreacted to past inflation pressures.     

Price stability through price-level targeting or inflation targeting? A tale of two experiments

Price stability can be attained through price-level or inflation targeting. This paper compares the two monetary policy strategies from both a historical and a theoretical perspective. The Swedish experiment with price-level targeting in the 1930 occurred within a framework that lacked the accountability characteristic of New Zealand's current policy framework for inflation-targeting. Using a simple forward-looking rational expectations framework, we show that price-level targeting offers a better output-inflation variability tradeoff than inflation targeting in the forward-looking New Keynesian framework.     

Information structure and stochastic control performance

The linear quadratic control problem with unknown parameters is analytically intractable. To obtain an analytically tractable strategy the statistical assumptions frequently considered are (1) fixed known parameters, (2) independent random parameters, and (3) independent path dependent stochastic parameters. Also considered are three information structures — (1) no observations, (2) observations without anticipation, and (3) observations with anticipation. Treating the assumptions as true, the performance of the strategies is shown to monotonically improve with respect to the information structure in order 1, 2, 3 and with respect to the statistical assumptions in order 2, 3, 1. The results provide estimates of the performance losses due to position and parameter uncertainty for the unknown parameter case.