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.

A dynamic econometric model of agricultural wage determination in Bangladesh.

Abstract: Economists applied data from 1949-1950 and 1980-1981 to a new dynamic model to examine the dynamics of determinants of agricultural wages in Bangladesh particularly the effect of changes in relative prices of rice (the staple food) and productivity. Just a 20% rise in the price or rice was passed on in the agricultural wage rate within the current year. About 50% was passed on in the long run however. Therefore an increase in the price of rice reduced the rice purchasing power of agricultural wages in the short and long term. In fact the importance given to rice in the long run real wage rate was almost the same as the mean proportion of expenditure that an agricultural laborer in Bangladesh committed to rice and closely related food staples. Thus arise in the price of rice in comparison to other goods had limited effects on the long run real wage in terms of the bundle of goods typically consumed but very adverse effects in the short run placing a high burden on the rural poor. On the other hand the long run real wage rate fell considerably between the mid 1960s-early 1980s when overall agricultural productivity increased. The economists pointed out that this increased productivity may not have lowered long run real wage rates but instead mitigating factors may have contributed to this fall. For example population growth rising landlessness and insufficient economic growth in nonagricultural sectors resulted in a consistent growth in the labor supply. In conclusion this new dynamic model showed that Bangladesh cannot depend only on agricultural growth to reduce the poverty of farmers.

Is Purchasing Power Parity a Useful Guide to the Dollar

Abstract: Some academic and business economists use the concept of purchasing power parity to help predict the foreign exchange value of the dollar. Purchasing power parity (PPP) is a measure of the dollar's equilibrium value--the exchange rate toward which the dollar moves over time. Because the value of the dollar is currently below its PPP value, PPP advocates argue that the dollar is undervalued and therefore likely to rise. Other economists acknowledge that PPP may help forecast the value of the dollar over the long run but doubt its usefulness as a short-run guide. They often cite the 1970s, when the dollar frequently strayed from its PPP value and sometimes took years to return. They also note that economic and political forces regularly buffet the dollar, keeping its value away from equilibrium. Thus, even though the dollar is currently below its PPP value, these economists maintain there is no guarantee it will rise in value in the near term. This article argues that PPP is a useful guide to the dollar in the long run and--to a lesser extent--in the short run. The first section of the article defines the concept and discusses why most economists believe it is a useful long-run guide. The second section shows the dollar generally moves toward its PPP value in the long run. The third section shows that in the short run the dollar generally moves toward its PPP value only when deviations from PPP are unusually large. Because today's dollar is not unusually low relative to PPP, the measure says little about whether the dollar will rise in the near term. WHAT IS PURCHASING POWER PARITY? Economists use three concepts of purchasing power parity to explain why goods in one country should cost the same as identical goods in another country. The law of one price relates exchange rates to prices of individual goods in different countries. Absolute PPP relates exchange rates to overall price levels. And relative PPP relates exchange rates to inflation rates. While the law of one price and absolute PPP are intuitively appealing as theories of exchange rates, relative PPP is more useful empirically. THE LAW OF ONE PRICE The law of one price is the simplest concept of PPP. It states that identical goods should cost the same in all countries, assuming it is costless to move goods between countries and there are no impediments to trade, such as tariffs or quotas. Before the costs of goods in different countries can be compared, however, prices must first be converted to a common currency. Once converted at the going market exchange rate, the prices of identical goods from any two countries should be the same. After converting pounds into dollars, for example, a sweater bought in the United Kingdom should cost the same as an identical sweater bought in the United States. In theory, markets enforce the law of one price. Specifically, the pursuit of profits tends to equalize the price of identical goods in different countries. Suppose the sweater bought in the United States was cheaper than the sweater bought in the United Kingdom after converting pounds into dollars. A U.S. exporter could make a profit by buying the U.S. sweater and selling it in the United Kingdom. Such profit opportunities would persist until the law of one price held. Exploiting these opportunities should ensure that the price of the sweater eventually equalizes in both countries, whether prices are expressed in dollars or pounds.(1) In practice, however, the law of one price does not always hold. International trade is far more complicated than suggested by simple economic theories. For example, the cost of transporting goods from one country to another limits the potential profit from buying and selling identical goods with different prices. In addition, tariffs and other impediments to trade potentially drive a wedge between the prices of identical goods in different countries. As a result, instead of focusing on a particular good or service when applying the PPP concept, most analysts focus on market baskets consisting of many goods and services. …

COVID-19 and the impact on food security in the Near East and North Africa: how to respond?

Abstract: This paper makes no attempt to produce an impact assessment of the COVID-19-induced outbreak. Instead, it aims to identify the channels of transmissions into the food and agriculture sectors and, based on this, to delineate the degrees of exposure to the COVID-19- induced shock by geographic region. The initial aim was to examine all elements of the food system. However, data availability limited the empirical analysis largely to primary production, trade and final consumption. These elements are analyzed in detail and, where possible, quantified. Based on results of the analysis, a country taxonomy of the exposure is developed and presented. With 80 percent of countries, accounting for 92 percent of global GDP2, under social distancing provisions, labour availability for agricultural supply chains has become a near ubiquitous problem. In general, low-income countries employ higher shares of labour for primary production, which makes them more exposed to direct disruptions in labour supply, including the farmer's own labour force. The same holds for labour-intensive production more generally. Various examples illustrate that fruit and vegetable as well as meat or dairy production have already been adversely affected by COVID-induced labour shortages. Such deficits can be caused by domestic labour supply disruptions, as well as by shortages of seasonal and migrant workers. In addition, also macroeconomic channels of transmission affect agricultural supply, trade and final demand. The precipitous fall in oil and metal prices, for instance, exerted downward pressure on the exchange rates of many commodity exporting countries (commodity currencies). While the downward pressure on exchange rates, triggered by price declines in nonfood commodities, affects all tradeable commodities, including food. It makes food suppliesinternationally more competitive, at least in the short term, and supports exports of food. In response to these changes, some commodity exporters have started to impose export restrictions on food and agricultural products to avoid compromising domestic supplies. Finally, and arguably most importantly, COVID-19 will exert a shock on final food demand by lowering overall purchasing power, especially for an increasing number of unemployed people. The extent of the impacts on food demand will depend on numerous factors, including the depth and length of the macroeconomic shock, the availability of savings and access to credit and safetynet mechanisms.

Exercising purchasing power for preventive care

Abstract: Prologue: More than five years ago the US, Public Health Service released Healthy People 2000, a document laying out the federal government's strategy for health promotion and disease prevention for the decade. The document built upon “the strong foundation of federalism that undergirds the American public health system by involving both private and public sectors at all levels,” in the words of James O, Mason, who was then assistant secretary for health in the Department of Health and Human Services, This paper by Helen Schauffler and Tracy Rodriguez provides an example of how one powerful employer purchasing coalition, the Pacific Business Group on Health (PBGH), has taken the private-sector side of this mandate seriously. The PBGH, based in California's San Francisco Bay Area, is one of the nations largest private employer purchasing groups. More than thirty major employers, representing 2,5 million persons, are members of the PBGH, formerly the Bay Area Business Group on Health, A powerful force for c...