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.

Covid-19, lockdown and transitory food insecurity in nigeria

Abstract: How did a health crisis camouflage to food crisis? Why did the spread of Covid-19 bring transitory food insecurity? Is lockdown order effective for us? The answer lied in two paradigms by which coronavirus stifled economic activities. First, the spread of the virus encouraged social distancing which led to the shutdown of food markets, restaurants, businesses, events centres and countries borders. Secondly, the pandemic nature of how the virus was spreading and the heightened uncertainty about how bad the situation could get to be. This research empirically focus on the implication of Covid-19 and lockdown on food security in Nigeria, as being food secure is one of the fundamental indices for development in a stable and growing economy and the nation at large. The finding reveals that the more stressful number of lockdown days and inter-states-countries movement restrictions the more it severely affect the level of economic (food prices skyrocket, increase in transport cost, hoardings by marketers, increase in postharvest lost at both farm and market levels, low purchasing power by household etc.) with adverse effect on food security. However, Palliatives measures such as food assistance and cash transfer measures should be adopted by government and other donors so as to reduce such momentum effect. If not are you expecting people that are living below 2 dollar per day to embrace the mandatory lockdown for good? Don’t you think Covid-19 could have long-term implications on us?

IDA in UF : on the benefits of changing the currency denomination of concessional lending to low-income countries

Abstract: Developing countries tend to overwhelmingly denominate their external debt in a few major foreign currencies. This makes the domestic cost of debt service dependent on the real exchange rate, which is a price that tends to strengthen in good times and weaken in bad times, thus making debt service anti-cyclical, rising just when it is most difficult to pay. Countries have a good reason to borrow in foreign currency: domestic currency markets abroad are essentially non-existent. Even the International Bank for Reconstruction and Development (IBRD) window of the World Bank lends in dollars because it must fund itself in the same capital markets that do not accept local currency denominations. The International Development Association (IDA) window also lends in dollars but does not have this excuse. It is funded with fiscal resources and could be lent, in principle, in any unit it wished. The authors argue that it should lend in inflation-indexed domestic currency, or UFs, following Chile's Unidades de Fomento.

Consumer Instalment and Home-Mortgage Debt

Abstract: CONSUMER investment-the expenditures for durable goods and newhome construction-exceeded $360 billion in the decade 1946-55. This is more than 50 per cent greater than business investment in plant and equipment during the same period. In addition, consumers spent large sums for existing homes and used cars. These expenditures have been a significant source of strength throughout the postwar economy. The strong and persistent consumer demand for homes and durables has reflected such well-known factors as the large backlog of needs that accumulated during the depression and war periods and the generally high level of new household formation which resulted from population growth, a high marriage rate, undoubling of families, and net migrations from farm to city and city to suburban areas. Desire and need, however, are not sufficient to create actual demand. It takes purchasing power, particularly for such high-cost items as homes, automobiles, and major household appliances. The rise in after-tax income has been one source of the high postwar demand for consumer investment goods. Disposable income of consumers has risen over 70 per cent in the past decade. Rising income, along with some redistribution in their favor, has resulted in a sharp increase in the number of families in the middle-income brackets. Families with incomes of $3,000 a year and over have more than doubled since 1945, and those with incomes of $5,000 and over have increased more than fourfold. Inasmuch as families in the $3,000 and over income bracket constitute the bulk of the market for new homes, automobiles, and major household appliances, the postwar rise in incomes has greatly broadened the market for these high-cost items. Instalment credit has been another significant force in translating desire for high-cost durables into actual purchases. Credit enables one to spend tomorrow's income today, and consumers have been dipping into tomorrow's income in a big way. Consumer instalment and homemortgage debt have soared to an all-time peak. The combined total exceeded $116 billion at the end of 1955, in contrast to only $21 billion a decade earlier. During 1955 instalment debt increased 24 per cent, and home-mortgage debt 17 per cent (see Table 1). It is not surprising, therefore, that concern has been aroused over both the rate of increase and the debt burden of consumers. The postwar growth in consumer instalment and home-mortgage debt reflects not only the factors mentioned earlier but also a more widespread use of credit by consumers. The use of instalment credit to buy durables and homes might well be labeled a "growth" institution. Evidence to this effect is the steadily increasing proportion of new cars bought on credit during the postwar period, which rose from 29 per cent of the total cars purchased in 1947 to 65 per cent in 1955. In the last two decades much progress has been made irn adapting the terms of consumer financing to the needs both of *The author is Financial Economist, Federal Reserve Bank of Philadelphia. The views expressed in this article are those of the author. He is indebted, however, to some of his colleagues for helpful suggestions; to Mrs. Evelyn Allin for preparation of the statistical material; and to Charles Mustoe for typing and editing the manuscript.

Purchasing Power Guarantees for Deferred Payments

Abstract: A MEASURE INTRODUCED in Finland in May 1955 appears to be one of the first steps taken by a banking system to introduce, in its pure form, a device that has long been advocated by theoretical economists. Most savings banks in Finland introduced at that time a new form of time deposit for their customers. In future, money could be deposited for one year, and at the end of the year the bank would undertake to credit the account with the amount that the cost of living index indicated was necessary to restore the account's original purchasing power.' The account would bear 434 per cent interest, 13/2 per cent below the prevailing rate on deposits without the purchasing power guarantee. Since this step was taken at a time when there was, in other countries, a rising practical interest in the device, it seems useful to re-examine closely the advantages claimed for such an arrangement and to study the practical problems and fears that have made such experiments rare. The theoretical support among economists for a purchasing power guarantee for deferred payments is most impressive. Marshall in 18862 strongly advocated the use of a standard unit of purchasing power in contracts for deferred payments, and reaffirmed this view in 1911.3 Jevons4 even earlier thought so much of the proposal that he suggested that it be made compulsory, after a short transition period, for "every money debt of, say, more than three months' standing [to] be varied according to the tabular standard"5 of purchasing power. Keynes6

The Euro Changeover in the Slovak Republic

Abstract: In January 2009, the Slovak Republic will adopt the euro and become the 16th member of the euro area. This paper investigates the implications of euro adoption in the Slovak Republic for inflation and interest rates with an attempt to quantify their likely size as well as their consequences for the general public. The empirical analysis – which makes use of the experience of the first-wave euro area countries – suggests that the cash changeover will most likely be associated with a moderate increase in consumer prices, estimated at around 0.3%. Policy measures to reduce this effect include public information campaigns, the conversion of publicly administered prices with the exact conversion rate and the reduction of administrative obstacles to increase supply. The minor purchasing power losses associated with this price increase will not be evenly distributed across the population with higher income households and families with children expected to be harder hit than others. Even though the exchange rate vis-a-vis the euro area will be irrevocably fixed, past appreciations of the koruna are still likely to pass-through to some downward pressure on consumer prices, with the cumulative effect estimated to amount to around 1.5% up to mid-2009. In the longer run, the Balassa-Samuelson effect and other factors affecting catch-up economies may raise the Slovak inflation rate above the euro area level. As capital markets have already fully priced in euro membership, no immediate effect on short- and long-term interest rates in the wholesale markets is to be expected for January 2009. In the longer run, euro adoption can be expected to foster financial integration, thereby leading to a convergence of Slovak retail interest rates towards euro area levels. This reduction in retail interest rates will benefit the general public with mortgage borrowers likely to reap the largest benefits. A potential risk of low real interest rates is the emergence of a boom-bust cycle; prudent fiscal policy and further structural reforms, including enhanced competition, would help to counter any such developments.