Normalized Prices as a Forecasting Tool.

Abstract

—In 2020, the retail price for a kilogram of butter in Russia was 638.69 rubles. The same price, but divided by GDP per capita, was 0.008757. Let’s call the resulting value the normalized price. The same normalized price for 1 kg of butter (0.008757) was in the United States and Sweden in 1949, and Australia in 1969. This allows data from more developed countries to be used to forecast prices in less developed countries for many years to come. To predict the normalized price, it is converted into a logarithm, which is decomposed into two components: international and national. The international component ln (Int) is determined by the laws of the market. The second, national, component ln (Nat) is determined by the peculiarities of the country’s policy. Arithmetically, it is the difference between the logarithms of the normalized price and the international component. The anomalousness of retail prices for butter in Russia, expressed in rubles during 1999–2020 is shown. In this period the prices were changing only in one direction—they were growing, which reflects the lack of competition on the market. The dynamics of normalized prices is described by the alternation of descending and ascending waves. On a descending wave, normalized prices go down—commodity availability increases, while an ascending wave corrects for a decline in rationed prices. According to the data of Australia, United Kingdom, New Zealand, USA, France and Sweden for 1801–2019, the average values of normalized prices were calculated for each year. It becomes clear that short series of the average values of normalized prices by country are lined up in a kind of parade of planets, which makes it easier to predict them. For ex-post forecast of normalized prices, the period 1801-2019 is divided into two parts: before and after 2010. Regression coefficients—weights for extrapolation of normalized prices for 2011–2019 are estimated according to the first part. Ex-post forecast is made according to the second part and compared with the actual values. The resulting differences are forecast errors. The independent variables of the model are the life expectancy of newborn males and the price of gold in US dollars. The mean square errors of such forecasts for each of the countries turned out to be LESS than the standard error of the equation used to estimate the regression parameters. In Russia, the actual prices for butter exceeded the ex-post forecast for 2016–2019. To characterize this excess, you can use the definition of "greed" proposed by the Prime Minister of the Russian Federation M. Mishustin.