Purchasing power

About: Purchasing power is a research topic. Over the lifetime, 2714 publications have been published within this topic receiving 36866 citations. The topic is also known as: adjusted for inflation.

Reserve currency allocation : an alternative methodology

Abstract: This paper provides a quantitative framework for choosing the composition of reserve currencies. Assuming that the central bank's performance objectives are defined in terms of ex post returns in different currency numeraires, the currency allocation problem is formulated as a multi-objective optimisation problem. The advantage of the proposed methodology is that it does not require any explicit assumptions about the risk preferences of the central bank or knowledge of the currency numeraire. Using some proxy values for the possible range of ex post returns measured in different currency numeraires, the study shows how the currency allocation problem can be solved. In particular, the proposed method borrows the concept of the degree of satisfaction from fuzzy decision theory and maximises such a function defined on the least favourable return outcome. In this sense, the proposed method differs from standard utility-based approaches which look for solutions that are best on average. The results of the study indicate that central banks on average are dollar-based investors on the basis of current allocations. Further, the study also indicates that if central banks consider an ex post return profile that safeguards the purchasing power of the reserves, then the currency distribution of reserves should more closely resemble the SDR basket.

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.

On the Manipulation of Money and Credit: Three Treatises on Trade-Cycle Theory

Abstract: Introduction The Outcome of Inflation The Emancipation of Monetary Value from the Influence of Government The Return to Gold The Money Relation Comments on the "Balance of Payments" Doctrine The Inflationist Argument The New Monetary System The Ideological Meaning of Reform The Problem The Gold Standard The "Manipulation" of the Gold Standard "Measuring" Changes in the Purchasing Power of the Monetary Unit Fishers Stabilization Plan Goods-induced & Cash-induced Changes in the Purchasing Power of the Monetary Unit The Goal of Monetary Policy Stabilization of the Purchasing Power of the Monetary Unit & Elimination of the Trade Cycle Circulation Credit Theory The Reappearance of Cycles The Crisis Policy of the Currency School Modern Cyclical Policy Control of the Money Market Business Forecasting for Cyclical Policy & the Businessman The Aims & Method of Cyclical Policy The Nature & Role of the Market Cyclical Changes in Business Conditions The Present Crisis Is There a Way Out? Index.

Historical Note on the Purchasing Power Concept, and Index Numbers

Abstract: (1946). Historical Note on the Purchasing Power Concept, and Index Numbers. Journal of the American Statistical Association: Vol. 41, No. 233, pp. 53-57.