Showing papers on "Consumer price index published in 2007"

Immigration and Prices

Abstract: This paper examines the behavior of prices following the unexpected arrival of a large number of immigrants from the former Soviet Union (FSU) to Israel during 1990. I use store‐level price data on 915 consumer price index products to show that the increase in aggregate demand prompted by the arrival of the FSU immigration significantly reduced prices during 1990. When one controls for native population size and city and month effects, a one‐percentage‐point increase in the ratio of immigrants to natives in a city decreases prices by 0.5 percentage point on average. It is argued that this negative immigration effect is consistent with FSU immigrants—the new consumers—having higher price elasticities and lower search costs than the native population. Thus immigration can have a moderating effect on inflation through its direct effect on product markets, and not only by increasing the supply of labor.

Heterogeneity in Consumer Price Stickiness

Abstract: We examine heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French consumer price index. For that purpose, we estimate at a very high level of disaggregation, a piecewise-constant hazard model, as well as competing-risks duration models that distinguish between price increases, price decreases, and product replacements. The main findings are the following: (a) at the product–outlet-type level, the baseline hazard function of a price spell is nondecreasing; (b) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape and the level of the hazard function as well as in the impact of covariates; (c) there is strong evidence of state dependence, especially for price increases; (d) there is an asymmetry because determinants of price increases differ from those of price decreases.

What do thirteen million price records have to say about consumer price rigidity

Abstract: Based on the analysis of 13 million price records underlying the computation of the French consumer price index, we provide a detailed assessment of consumer price rigidity Our main results are as follows The average duration of prices is around 8 months Price durations and the patterns of price-setting strongly differ across sectors Price cuts are almost as frequent as increases, suggesting no specific downward nominal rigidity Price changes typically have large absolute sizes Time variation in the frequency of price changes and in their size both contribute to inflation fluctuations Overall there is evidence of both time- and state-dependent price-setting

System and method for matching customers to financial products, services, and incentives based on bank account transaction activity

Abstract: A financial scoring system measures, classifies, rates, and forecasts the deposit and withdrawal patterns processed through a direct deposit account (DDA) residing in a bank's central database. The scoring metric generated by the financial scoring system is converted into a monthly mandatory, lifestyle, leisure, and luxury expenditure classifications for each DDA household. These expenditure classifications are converted by the financial scoring system to the rate of expenditure substitution each DDA household will support, the amount of the rate of expenditure substitution that the DDA household is willing to risk, and the rate of expenditure substitution that will require a preference spending decision. The DDA expenditure classifications generated by the financial scoring system are compared to the consumer expenditure survey and consumer price index tables published by U.S. Department of Labor Bureau of Labor Statistics to provide a scoring validation benchmark.

What do Thirteen Million Price Records have to Say about Consumer Price Rigidity

Abstract: Based on the analysis of 13 million price records underlying the computation of the French consumer price index, we provide a detailed assessment of consumer price rigidity. Our main results are as follows. The average duration of prices is around 8 months. Price durations and the patterns of price-setting strongly differ across sectors. Price cuts are almost as frequent as increases, suggesting no specific downward nominal rigidity. Price changes typically have large absolute sizes. Time variation in the frequency of price changes and in their size both contribute to inflation fluctuations. Overall there is evidence of both time- and state-dependent price-setting.

Determinants oF Recent Inflation in Pakistan

Abstract: The expansionary economic policies of the government and of the central bank (State Bank of Pakistan – SBP), which on one side resulted in impressive economic performance, stimulated a rise in the Consumer Price Index (CPI) on the other. This initiated a debate on the determinants of the recent inflation. Some blamed fiscal policy or monetary policy, while others blamed imported inflation, administered prices or mismanagement and loose control of the government. This study, adopting an econometric framework, focuses on the identification of the main determinants of recent inflation trends. Using data from the 1972-73 to 2005-06 period, applying ordinary least square method and verifying results through Breusch-Godfrey Serial Correlation LM and Augmented Dickey-Fuller tests, it finds that the most important determinants of inflation in 2005-06 were adaptive expectations, private sector credit and rising import prices. Whereas, the fiscal policy’s contribution to inflation was minimal.

Pessimism Preserved: Real Wages in the British Industrial Revolution

Abstract: The paper compares Feinstein’s and Clark’s consumer price and real wage indices for the British industrial revolution. The sources for their weights and component price series are evaluated. While some of Clark’s innovations are improvements, many of his changes degrade the price index. A new price index is developed using the best components of Clark’s and Feinstein’s. This index is much closer to Feinstein’s than to Clark’s. The implied growth in real wages is also close to Feinstein’s and contradicts Clark’s ‘optimistic’ view of rising working class living standards during the industrial revolution.

Modeling Bank Lending in the Euro Area: A Non-Linear Approach

Abstract: This paper investigates possible non-linearities in the response of bank lending to monetary policy shocks in the euro area. The credit market is modeled over the period 1985-2005 by means of an Asymmetric Vector Error Correction Model (AVECM) involving four endogenous variables (loans to the private sector, real GDP, lending rate, and consumer price index) and one exogenous variable (money market rate). The main features of the model are the existence of two co-integrating equations representing the long-run credit demand and supply and the possibility for loading and lagged-term coefficients to assume different values depending on the monetary policy regime (easing or tightening). The paper finds that the effect on credit, GDP, and prices of a monetary policy tightening is larger than the effect of a monetary policy easing. This result supports the existence of an asymmetric broad credit channel in the euro area.

Consumer Demand under Price Uncertainty: Empirical Evidence from the Market for Cigarettes

Abstract: We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward-looking individuals depend on preferences, current period prices, and ind...

Modeling the impact of external factors on the euro area's hicp and real economy a focus on pass-through and the trade balance 1

Abstract: This paper aims to analyze the impact of external factors, such as the nominal effective exchange rate, foreign demand and the terms of trade, on the euro area real economy. In particular, the paper estimates the quantitative impact that changes in these factors have on net trade, real GDP and the Harmonized Consumer Price Index (HICP). To this end, we estimate a Dynamic Simultaneous Equation Model (DSEM) accounting for the presence of key exogenous variables. The tool utilized here to measure the impact of various shocks on the real economy is the impulse response function. The study is also conducted at sub-components level. First, we estimate the model replacing net trade with its sub-components, namely, the volume of exports and the volume of imports. Then, we re-estimate the model by dividing the terms of trade index into import and export prices. Overall, we estimate three models. Two of these models show consistent results. We found that the nominal effective exchange rate and foreign demand are the main determinants of the trade balance. Nevertheless, while foreign demand strongly affects real GDP, the nominal effective exchange rate affects it only slightly. Among the external factors, foreign demand has the strongest impact on real GDP. Regarding the impact of the nominal effective exchange rate on import prices and HICP, we found that the exchange rate pass-through for the euro area is not very high. This result is broadly in line with the findings presented in Hahn (2003).

A Reconciliation between the Consumer Price Index and the Personal Consumption Expenditures Price Index

Abstract: The Bureau of Labor Statistics (BLS) prepares the Consumer Price Index for All Urban Consumers (CPI-U), and the Bureau of Economic Analysis prepares the Personal Consumption Expenditures (PCE) chain-type price index. Both indexes measure the prices paid by consumers for goods and services. Because the two indexes are based on different underlying concepts, they are constructed differently, and tend to behave differently over time. From the first quarter of 2002 through the second quarter of 2007, the CPI-U increased 0.4 percentage point per year faster than the PCE price index. This paper details and quantifies the differences in growth rates between the CPI-U and the PCE price index; it provides a quarterly reconciliation of growth rates for the 2002:Q1- 2007:Q2 time period. There are several factors that explain the differences in growth rates between the CPI and the PCE price index. First, the indexes are based on difference index-number formulas. The CPI-U is based on a Laspeyres index; the PCE price index is based on a Fisher-Ideal index. Second, the relative weights assigned to the detailed item prices in each index are different because they are based on different data sources. The weights used in the CPIU are based on a household survey, while the weights used in the PCE price index are based on business surveys. Third, there are scope differences between the two indexes— that is, there are items in the CPI-U that are out-of-scope of the PCE price index, and there are items in the PCE price index that are out-of-scope of the CPI-U. And finally, there are differences in the seasonal-adjustment routines and in the detailed price indexes used to construct the two indexes. Over the 2002:Q1-2007:Q2 time period, this analysis finds that almost half of the 0.4 percentage point difference in growth rates between the CPI-U and the PCE price index was explained by differences in index-number formulas. After adjusting for formula differences, differences in relative weights—primarily “rent of shelter”—more than accounted for the remaining difference in growth rates. Net scope differences, in contrast, partly offset the effect of relative weight differences.

Comparing the Consumer Price Index and the Personal Consumption Expenditures Price Index

Abstract: N THE United States, there are two primary mea­ sures of the prices paid by consumers for goods and services. One is the Consumer Price Index for All Ur­ ban Consumers (CPI) prepared by the Bureau of Labor Statistics (BLS), and the other is the Personal Con­ sumption Expenditures (PCE) chain-type price index prepared by the Bureau of Economic Analysis (BEA). These two price indexes have different purposes and uses. Thus, they are constructed differently and tend to behave differently over time. 1 Chart 1 shows the quar­ terly growth rates for the two indexes from the first quarter of 2002 through the second quarter of 2007. Although the magnitude and direction of these differ­ 1. The CPI measures the change in prices paid by urban consumers for a market basket of consumer goods and services; it is primarily used as an economic indicator and as a means of adjusting current-period data for inflation. The PCE price index measures the change in prices paid for goods and services by the personal sector in the U.S. national income and product accounts; it is primarily used for macroeconomic analysis and forecasting.

Does PPP hold for Big Mac price or consumer price index? Evidence from panel cointegration

Abstract: This paper examines the validity of purchasing power parity (PPP) using CPI and Big Mac prices. The benchmark model, i.e., the OLS method, which does not take nonstationarity into account, rejects the hypothesis of PPP regardless of prices used. We next use the panel cointegration method to consider the nonstationary nature of variables. Estimated results for CPI are mixed. The PPP is rejected when the nominal exchange rate is employed as the dependent variable but is not rejected when the price ratio is used as the dependent variable. By contrast, the PPP is overwhelmingly not rejected when the Big Mac price is used. Last, we remove the production bias and re-examine the same issue by using panel cointegration. The PPP is again decisively rejected when CPI price is used but not for Big Mac price. Accordingly, Big Mac price is more supportive to the validity of PPP than CPI price.

Defining Price Stability in Japan: A View from America

Abstract: Japanese monetary and fiscal policy uses the consumer price index as a metric for price stability. Despite a major effort to improve the index, the Japanese methodology of calculating the CPI seems to have a large number of deficiencies. Little attention is paid in Japan to substitution biases and quality upgrading. This implies that important methodological differences have emerged between the U.S. and Japan since the U.S. started to correct for these biases in 1999. We estimate that using the new corrected U.S. methodology, Japan's deflation averaged 1.2 percent per year since 1999. This is more than twice the deflation suggested by Japanese national statistics. Ignoring these methodological differences misleading suggests that American real per capita consumption growth has been growing at a rate that is almost 2 percentage points higher than that of Japan between 1999 and 2006. When a common methodology is used Japan's growth has been much closer to that of the U.S. over this period. Moreover, we estimate that the bias of the Japanese CPI relative to a true cost-of-living index is around 2 percent per year. This overstatement in the Japanese CPI in combination with Japan's low inflation rate is likely to cost the government over 69 trillion yen -- or 14 percent of GDP -- over the next 10 years in increased social security expenses and debt service. For monetary policy, the overstatement of inflation suggests that if the BOJ adopts a formal inflation target without changing the current CPI methodology a lower band of less than 2 percent would not achieve its goal of price stability.

Economic factors and psychiatric hospital beds – an analysis of historical trends

Abstract: Purpose – The purpose of this paper is to explore the association between economic factors (consumer price index, real gross domestic product per capita, base discount rate, and rate of unemployment) and numbers of hospital psychiatric beds.Design/methodology/approach – Time series analytical techniques (unit root and cointegration tests) were applied to two regional data sets from the nineteenth century (North Carolina, USA; Berkshire, UK) and three national data sets in the twentieth century (US; UK; Italy) to test the hypothesis of a relationship.Findings – All data sets suggest a long‐run relationship between economic factors and psychiatric bed numbers. Increase of consumer price predicted a decrease of hospital beds (and vice versa) in all data sets and was the strongest predictor of changes in psychiatric bed numbers. Hence, economic factors appear to be an important driver for the supply of hospital beds.Research limitations/implications – Cointegration tests are not true causality tests as they o...

Raw material prices, wages, and profitability in China industry : how was profitability maintained when input prices and wages increased so fast?

Abstract: The World Bank China Research paper is industrial sector has faced large increases in raw material prices, and wages also risen significantly. These papers aims at analyzed and quantify the impact of the cost pressures on the profitability of industry. By combined information from the input output table and time series from the enterprise survey and on prices, wages, and employment. It estimates has happened to the technical efficiency of the usage of intermediate inputs: the amount of intermediary inputs adjusted for price changes. The find it has improved significantly since 2002 in most sectors in core manufacturing, although not for all. The second factor that has offset increase input prices and wages is labor productivity growth, measured as value added per worker. The results suggest that sectors that faced higher cost pressures have made larger efforts to offset the cost pressures. The gap between output price rises and input price rises increased from 4 percentage points in 2005 to 4.3 percentage points in 2006 for core manufacturing. This was possible the same time increase the average profit margin shows the ability of China's industry to offset rising raw material prices by increase efficiency has so far remained undiminished.

Social Security Cost-of-Living Adjustments and the Consumer Price Index

Abstract: Social Security - Old-Age, Survivors, and Disability Insurance (OASDI) - benefits are indexed for inflation to protect beneficiaries from the loss of purchasing power implied by inflation. In the absence of such indexing, the purchasing power of Social Security benefits would be eroded as rising prices raise the cost of living. Recently, the consumer price index used to calculate the cost-of-living-adjustment (COLA) for Social Security (OASDI) benefits has come under increased scrutiny. Some argue that the current index does not accurately reflect the inflation experienced by seniors and that COLAs should be larger. Others argue that the measure of inflation underlying the COLA has technical limitations that cause it to overestimate changes in the cost of living and that COLAs should be smaller. This article discusses some of the issues involved with indexing Social Security benefits for inflation and examines the ramifications of potential changes to COLA calculations.

The Minimum Wage, Restaurant Prices, and Labor Market Structure

Abstract: Using store-level and aggregated Consumer Price Index data, we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation. We introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments. Furthermore, the model implies employment and prices are always negatively related. Therefore, our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes. Our estimated price responses challenge other explanations of the small employment response too.

Social Security Cost-of-Living Adjustments and the Consumer Price Index

Abstract: OASDI benefits are indexed for inflation to protect beneficiaries from the loss of purchasing power implied by inflation. In the absence of such indexing, the purchasing power of Social Security benefits would be eroded as rising prices raise the cost of living. By statute, cost-of-living adjustments (COLAs) for Social Security benefits are calculated using the Bureau of Labor Statistics (BLS) Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Some argue that this index does not accurately reflect the inflation experienced by the elderly population and should be changed to an elderly-specific price index such as the Experimental Consumer Price Index for Americans 62 Years of Age and Older, often referred to as the Consumer Price Index for the Elderly (CPI-E). Others argue that the measure of inflation underlying the COLA is technically biased, causing it to overestimate changes in the cost of living. This argument implies that current COLAs tend to increase, rather than merely maintain, the purchasing power of benefits over time. Potential bias in the CPI as a cost-of-living index arises from a number of sources, including incomplete accounting for the ability of consumers to substitute goods or change purchasing outlets in response to relative price changes. The BLS has constructed a new index called the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) that better accounts for those consumer adjustments. Price indexes are not true cost-of-living indexes, but approximations of cost-of-living indexes (COLI). The Bureau of Labor Statistics (2006a) explains the difference between the two: As it pertains to the CPI, the COLI for the current month is based on the answer to the following question: "What is the cost, at this month ' market prices, of achieving the standard of living actually attained in the base period?" This cost is a hypothetical expenditure-the lowest expenditure level necessary at this month's prices to achieve the base-period's living standard.... Unfortunately, because the cost of achieving a living standard cannot be observed directly, in operational terms, a COLI can only be approximated. Although the CPI cannot be said to equal a cost-of-living index, the concept of the COLI provides the CPI's measurement objective and the standard by which we define any bias in the CPI. While all versions of the CPI only approximate the actual changes in the cost of living, the CPI-E has several additional technical limitations. First, the CPI-E may better account for the goods and services typically purchased by the elderly, but the expenditure weights for the elderly are the only difference between the CPI-E and CPI-W. These weights are based on a much smaller sample than the other two indices, making it less precise. Second, the CPI-E does not account for differences in retail outlets frequented by the aged population or the prices they pay. Finally, the purchasing population measured in the CPI-E is not necessarily identical to the Social Security beneficiary population, where more than one-fifth of OASDI beneficiaries are under age 62. Likewise, over one-fifth of persons aged 62 or older are not beneficiaries, but they are included in the CPI-E population. Finally, changes in the index used to calculate COLAs directly affect the amount of benefits paid, and as a result, projected solvency of the Social Security program. A switch to the CPI-E for the December 2006 COLA (received in January 2007) would have resulted in an average monthly benefit $0.90 higher than that received. If the December 2006 COLA had been adjusted by the Chained CPI-U instead, the average monthly benefit would have been $4.70 less than with current indexing. Any changes to the COLA that would cause faster growth in individual benefits would make the projected date of insolvency sooner, while slower growth would delay insolvency. Hobijn and Lagakos (2003) estimated that switching to the CPI-E for COLAs would move projected insolvency sooner by 3-5 years. A projection by SSA's Office of the Chief Actuary estimated that annual COLAs based on the Chained C-CPI-U beginning in 2006 would delay the date of OASDI insolvency by 4 years.

An Improved Long-Run Consumer Price Index for the United States

Abstract: The consumer price index series in the Historical Statistics of the United States, millennial edition, is improved via construction of a new long-run consumer price index series. For a component series, the author uses a neglected series developed by Paul Douglas. Although differences between the Historical Statistics series and the new series are not large, the Historical Statistics series nevertheless exhibits both conceptual and computational weaknesses when compared with the new series. Furthermore, the Historical Statistics series systematically diverges from the new series. In effect, the Historical Statistics series has two segments, which are improperly linked. Empirical evidence suggests the superior representativeness of the new series.

The Costs of Doing Hard Time: A penitentiary-based regional price index for Canada, 1883-1923

Abstract: . We construct consumer price indices for Canada, based mainly on the expenditure records of Canada's federal penitentiaries. Regional price variation was much greater in Canada in the late nineteenth century than in the northern U.S. The new data suggest substantial price decline to 1900. Regional price variation in Canada decreased gradually to 1914, and quickly during the First World War. For 1900–14 and 1922–3, new data are largely consistent with consumer price data compiled by the Labour Gazette. The new data suggest more inflation during the First World War. On construit des indices de prix a la consommation pour le Canada a partir des archives de depenses des penitenciers federaux au Canada. La variation regionale des prix etait plus grande au Canada que dans le nord des Etats-Unis a la fin du 19e siecle. Ces nouvelles donnees suggerent qu'il y a eu chute substantielle des prix jusqu'en 1900. La variation regionale des prix decline graduellement au Canada jusqu'en 1914 et rapidement durant la premiere guerre mondiale. Pour les periodes de 1900–14 et 1922–3, les nouvelles donnees s'arriment assez bien avec les donnees sur les prix a la consommation compilees par La Gazette du Canada. Ces donnees nouvelles suggerent qu'il y a eu davantage d'inflation au cours de la premiere guerre mondiale.

Inflation and Unemployment: A Layperson's Guide to the Phillips Curve

Abstract: What do you remember from the economics class you took in college? Even if you didn't take economics, what basic ideas do you think are important for understanding the way markets work? In either case, one thing you might come up with is that when the demand for a good rises-when more and more people want more and more of that good- its price will tend to increase. This basic piece of economic logic helps us understand the phenomena we observe in many specific markets-from the tendency of gasoline prices to rise as the summer sets in and people hit the road on their family vacations, to the tendency for last year's styles to fall in price as consumers turn to the new fashions. This notion paints a picture of the price of a good moving together in the same direction with its quantity-when people are buying more, its price is rising. Of course supply matters, too, and thinking about variations in supply- goods becoming more or less plentiful or more or less costly to produce- complicates the picture. But in many cases such as the examples above, we might expect movements up and down in demand to happen more frequently than movements in supply. Certainly for goods produced by a stable industry in an environment of little technological change, we would expect that many movements in price and quantity are driven by movements in demand, which would cause price and quantity to move up and down together. Common sense suggests that this logic would carry over to how one thinks about not only the price of one good but also the prices of all goods. Should an average measure of all prices in the economy-the consumer price index, for example-be expected to move up when our total measures of goods produced and consumed rise? And should faster growth in these quantities-as measured, say, by gross domestic product-be accompanied by faster increases in prices? That is, should inflation move up and down with real economic growth? The simple intuition behind this series of questions is seriously incomplete as a description of the behavior of prices and quantities at the macroeconomic level. But it does form the basis for an idea at the heart of much macroeconomic policy analysis for at least a half century. This idea is called the "Phillips curve," and it embodies a hypothesis about the relationship between inflation and real economic variables. It is usually stated not in terms of the positive relationship between inflation and growth but in terms of a negative relationship between inflation and unemployment. Since faster growth often means more intensive utilization of an economy's resources, faster growth will be expected to come with falling unemployment. Hence, faster inflation is associated with lower unemployment. In this form, the Phillips curve looks like the expression of a tradeoff between two bad economic outcomes-reducing inflation requires accepting higher unemployment. The first important observation about this relationship is that the simple intuition described at the beginning of this essay is not immediately applicable at the level of the economy-wide price level. That intuition is built on the workings of supply and demand in setting the quantity and price of a specific good. The price of that specific good is best understood as a relative price- the price of that good compared to the prices of other goods. By contrast, inflation is the rate of change of the general level of all prices. Recognizing this distinction does not mean that rising demand for all goods-that is, rising aggregate demand-would not make all prices rise. Rather, the important implication of this distinction is that it focuses attention on what, besides people's underlying desire for more goods and services, might drive a general increase in all prices. The other key factor is the supply of money in the economy. Economic decisions of producers and consumers are driven by relative prices: a rising price of bagels relative to doughnuts might prompt a baker to shift production away from doughnuts and toward bagels. …

Modelling bank lending in the euro area: A non-linear approach

Abstract: This paper investigates possible non-linearities in the response of bank lending to monetary policy shocks in the euro area. The credit market is modelled over the period 1985-2005 by means of an Asymmetric Vector Error Correction Model (AVECM) involving four endogenous variables (loans to the private sector, real GDP, lending rate, and consumer price index) and one exogenous variable (money market rate). The main features of the model are the existence of two co-integrating equations representing the long-run credit demand and supply and the possibility for loading and lagged-term coefficients to assume different values depending on the monetary policy regime (easing or tightening). The paper finds that the effect on credit, GDP, and prices of a monetary policy tightening is larger than the effect of a monetary policy easing. This result supports the existence of an asymmetric broad credit channel in the euro area.

The information role of commodity prices in formulating monetary policy: Some evidence from Japan

Abstract: This paper uses the BOJ index published by the Bank of Japan to empirically analyze the relationship between the commodity price index and macroeconomic variables in Japan. The BOJ index was found to be valid as a leading indicator of the consumer price index before the zero interest policy was introduced. Afterwards, however, this relationship ceased to exist.

Price Setting in Austria before and after the Euro Cash Changeover: Has Anything Changed in the Last Five Years?

Abstract: This study addresses the question of whether the price adjustment process in Austria has changed since the changeover to euro notes and coins at the beginning of 2002. For this purpose, we analyze the frequency and size of price adjustments, sectoral and seasonal differences as well as the structure of prices (notably the share of attractive prices) on the basis of micro price observations underlying the Austrian Consumer Price Index (CPI). A data set spanning the period from 1996 to mid-2006 was used for the analysis. In addition to confirming known results from previous studies – i.e. that price adjustments occur roughly once per year on average, but with strong sectoral differences – our study reveals an unchanged seasonal pattern of price adjustments, with major peaks in January, also after the cash changeover. At the time of the changeover itself, the observed price changes were more frequent but smaller than usual. As upward and downward price adjustments were also roughly balanced, the cash changeover appears to have had no significant overall inflationary effects, confirming previous studies. The share of attractive prices (i.e. prices ending in 9 or 90, and even prices), which was over 60% before the cash changeover, plummeted to just over 20% in early 2002. In the course of the ensuing three to four years, however, this share again approached the level observed prior to the transition. From these results we conclude that price-setting habits as well as the structure of Austrian consumer prices has not changed significantly since the cash changeover.

Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach

Abstract: The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero, implying that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated and estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 percent to 3 percent of consumption expenditure.

Do Regional Price Levels Converge?: Paneleconometric Evidence Based on German Districts

Abstract: We investigate price index convergence on the base of regional data for 439 German districts. Prices refer to the overall consumer price index as well as to the index without housing prices. To increase the efficiency of the testing framework, a panel unit root analysis is performed, where cross section dependencies are taken into account. The tests indicate a lack of regional price convergence. While the idiosyncratic component of price differentials is mostly stationary, their common component is driven by a unit root. The results are very similar for the overall price index and the index without housing prices, and for the Western and Eastern part of the German economy. Obviously the elimination of housing prices is not sufficient to obtain a price index where tradable products dominate. One rationale of our findings is the persistent west-east divide in consumer prices. A second argument is related to the persistence of the price gradient between urban and rural regions.

Macroeconomic Determinants of Exchange Rate Pass-Through in India

Abstract: This paper examines the evolution of exchange rate pass-through (ERPT) into India's consumer price index (CPI) at the aggregate level over the period 1980Q1-2006Q4. It also investigates whether the extent of exchange rate pass-through is impacted by common macro fundamentals such as inflation and exchange rate volatility. Finally, the paper also tests for possible asymmetries of ERPT during periods of depreciation versus appreciation.

Política Monetária E Variabilidade Dos Preços Relativos: Uma Análise Do Caso Brasileiro

Abstract: The aim of this paper is to examine empirically the causal relationship between inflation and inter-market relative price variability in Brazil The period of analysis starts with the implementation of the Real Plan up to the middle of 2006 However, emphasis is given to the period related to the Inflation Targeting framework onwards The analysis focuses on the IPCA (the Brazilian Monthly Consumer Price Index), which is also disaggregated into market prices, monitored prices, tradables, non-tradables and services The econometric methodology applied is a series of ARIMA-GARCH models, Granger causality testes and impulse response functions Some of the conclusions reached are as follows: i) as in most of the empirical studies, the correlation between inflation and RPV is positive and significant in all estimations; ii) for the Inflation Targeting period there is a considerable reduction in the variability of relative prices; iii) there is downward price rigidity only for administered prices and services; iv) Granger causality between inflation and price dispersion is found only for the IPCA (full sample) and tradables; v) the impulse response functions show that the exchange rate perturbations do not influence price variability and that perturbations to administered prices are important to explain the other dispersions of relative prices