Showing papers on "Purchasing power published in 1984"

Conspicuous Consumption: A Literature Review

Abstract: States that status and prestige considerations play a significant part in shopping preferences for products, which, although they appear to have a direct utility, serve only as a means of displaying wealth and purchasing power. Examines the literature on the subject, looking at the conspicuous customer, for whom the cost of a purchase is only of real significance and not the product. Suggests, from the literature, that consumer behaviour and demand for status goods and services needs further investigation.

Currency Preferences, Purchasing Power Risks, and the Determination of Exchange Rates in an Optimizing Model

Abstract: MOST RECENT RESEARCH on the theory of exchange rate determination treats the exchange rate as the relative price of two assets: domestic money and foreign money. The value of an asset depends on the distribution of its return. However, most of the research has dealt with models in which there is no uncertainty. The present paper focuses on questions that cannot be addressed in a world of certainty, because in such a world an asset is never risky. It investigates how purchasing power risks affect the determination of exchange rates. This investigation is pursued in a fairly general optimizing model. The present research is related to some recent work in international economics and in financial economics. It follows the approach of Obstfeld (1981) and Stockman (1980) in that it uses an optimizing model and takes into account the role of government transfers in the flow budget constraint of individuals. As in Calvo and Rodriguez (1977), Stockman (1980), and others, the fact that holdings of foreign monies are useful to domestic individuals is taken into account. Finally, the paper uses techniques developed in papers in the finance literature which build on Merton's (1973) asset-pricing model and use a concept of equilibrium developed in

State-Class Alliances and Conflicts: Issues and Actors in the Mexican Economic Crisis

Abstract: The world economic recession that began in the late 1970s has had devastating effects on the economies of most Third World countries. The drop in prices of primary commodities exported by Third World states, the decline in purchasing power of advanced industrial states, and in some cases protectionist measures enacted by the latter led to sharp declines in export earnings. The burden of Third World debt repayment for loans granted and in fact promoted by international banks during a period of excess liquidity was exacerbated by the subsequent contraction of financial resources and a 300 percent increase in interest rates in U.S. and London markets between 1977 and 1981. The external crisis has further debilitated weak internal economic structures, in many cases leading to cutbacks in production, unemployment, and the closing down of firms. Several countries have been forced to resort to loans from the International Monetary Fund (IMF) to maintain their credit standing, which has required the implementation of a series of austerity measures resulting in further economic contraction and general misery for the population of these countries. The crisis inevitably raises questions regarding the models of economic development pursued by peripheral states, which, on the one hand, may be seen as causes of the crises (particularly in their vulnerability to external influences) and, on the other, may be jeopardized by it (for example, through enforced contraction of the role of the state, often a primary actor in peripheral economies). This raises the possibility of

Prices, Terms of Trade, and the Role of Government in Pakistan's Agriculture

Abstract: Despite the importance of agriculture to the national economy of Pakistan and the major role played by the government in its development, a number of key issues have not been adequately addressed by existing studies This paper provides an empirical basis for discussion of changes in the agricultural terms of trade, growth of agricultural productivity and incomes, pricing of agricultural inputs and outputs, and subsidization and taxation of agriculture It notes that the terms of trade between agriculture and the other sectors have not significantly deteriorated during the period 1960-83, and farmers' purchasing power has actually improved Net returns to farmers increased until the recent sharp increases in fertilizer prices reversed this trend Economic taxation of wheat and basmati rice in contrast to the economic subsidies provided to sugar should be a matter of concern This paper argues that appropriate price policies which are responsive to changes in international prices are likely to have as salutary an effect as any attempt to reduce financial subsidies or to increase taxes

Financial Futures Markets and Tabular Standards

Abstract: The goal of a monetary system that provides assurance against fluctuations in purchasing power is ancient. One frequently suggested and repeatedly rediscovered proposal is to attain that result by linking the currency unit to a price index. That device was proposed in the nineteenth century by W. Stanley Jevons and by Alfred Marshall, who named it a tabular standard. It has been repeatedly rediscovered. In Marshall's version it required no governmental action except the issuance of a price index number, something which has of course become widely prevalent. Individuals would simply in their own interest be led to make contracts specified not in terms of the nominal number of monetary units-the number of dollars-but in terms of the purchasing power equivalent of the present number of monetary units; that is, the contract would call for paying a given number of dollars multiplied by the ratio of a price index as of that date to the date on which the contract was entered into. Despite the theoretical attractiveness of this idea and the absence of any effective hindrance to its adoption, it has never become popular. It is a particular version of the generally attractive idea of widespread indexation. Yet indexation has been extensive only when inflation has been extremely high and variable as in some South American countries and Israel-and has generally fallen into disuse when inflation has been conquered. The only area in which there are any large number of indexed contracts is the area of labor contracts, and even here the use of indexation is by no means dominant and tends to rise and decline as inflation rises and declines.

Managing corporate pension plans : the impacts of inflation

Abstract: Do the effects of inflation threaten the nationA¢Â€Â™s private pension plans? The answer given by the authors of this study is no, although some pension plans have failed to compensate investors for the erosion of the purchasing power of their funds.

Inflationary Effects on Pension Plans: Wage and Benefit Patterns

Abstract: Most studies on pension funds under inflationary circumstances emphasize the protection of the purchasing power of the investments as the major problem. The high inflation rates in Israel makes it possible to isolate and examine additional important effects which are related to the relationships among the wage patterns, the insured wage and the pension schemes under inflation. It emphasizes the impact of inflation on the contributions to the funds, and on the benefit patterns, under various methods of indexation. The study, which is based on the experience with approximately one half of the employees in Israel, may relate to general problems which are experienced in other countries having lower rates of inflation.

Present policies and methods regarding the long-term adjustment of benefits.

Abstract: If beneficiaries are to maintain their standard of living at a level close to what it was before they left the workforce, the payments they receive under the Social Security program must be periodically adjusted to account for changes in the cost of living. This article describes the policies and practices employed by the Social Security Administration to accomplish this objective. It describes the historical development of various automatic-adjustment provisions, how contributions are indexed to determine the initial benefit, and how the purchasing power of the benefit is adjusted as the result of changes in the Consumer Price Index. Other factors that will affect long-term benefits, such as changes in the normal retirement age and in the size of the delayed retirement credit, are also explored.

NIH fares relatively well, but dollars buy less.

Abstract: Biomedical research, even in times of unprecedented budgetary deficit, still has some clout compared with other federal health efforts. Alone among the agencies of the Public Health Service, the National Institutes of Health (NIH) expects a 2% increase—$89,118,000 in all—over its present budget allocation. (In the 1985 budget sent to Congress by President Reagan, the NIH would receive $4.5 billion.) Still, when an annual inflation rate of 4.2% —the figure used by the Reagan Administration—is taken into account, this actually represents a reduction of 2.2% over the 1984 budget in dollar purchasing power. But, at least by comparison with other agencies in the Public Health Service, the NIH fares well in this budget. For instance, the budget for the Centers for Disease Control in Atlanta has been cut by $10 million from its 1984 total of $290 million. The result is a reduction of 7.3% in terms of actual purchasing

Postretirement Increases under Private Pension Plans

Abstract: Rapid inflation over a short time span can substantially reduce the purchasing power of fixed retirement incomes . For example, over the 1978-81 period, when consumer prices rose 51 percent,' retirees with fixed private pensions experienced a one-third decline in the buying power of these annuities . A lower rate of inflation-but continuing over a longer period-may have still greater effects on today's retirees, who often will receive pension benefits for 15 years or more. An inflation rate of 5 percent a year would, after 15 years, cut in half the purchasing power of the original pension benefit, and a 7 .5-percent annual rate of price increase would result in a two-thirds reduction. Thus, even without "double-digit" inflation, the value of a fixed pension can be seriously eroded during retirement . To offset part of this loss, many employers grant pension increases to retirees or their beneficiaries . 3 Information on the extent of these postretirement pension increases is available from the Bureau's annual survey of the incidence and provisions of employee benefit plans.' This survey is conducted in the United States-excluding Alaska and Hawaii-in private sector establishments employing at least 50, 100, or 250 workers, depending on the industry . Industrial coverage includes mining ; construction ; manufacturing; transportation, communications, electric, gas,