Domestic Price Inflation Research Articles

Commodity Prices and the Dynamics of Inflation in Commodity‐Exporting Nations: Evidence from Australia and Canada*

A commodity‐price boom is under way. What does this boom mean for inflation in countries with substantial net commodity exports? The answer depends on movements in commodity prices, changes in foreign exchange rates and the determinants of domestic price inflation. We estimate equations to provide indications of the strength of each of these forces for both Australia and Canada. The results show that world commodity prices move pro‐cyclically with world industrial production and that rates of change in commodity prices are directly related to domestic inflation in both countries. However, there is an offsetting impact of exchange‐rate changes, which is strong enough in the case of Australia, but not Canada, to substantially eliminate the inflationary impact of a commodity‐price boom.

Learning about Monetary Policy Rules in Small Open Economies

We evaluate the expectational stability (E-stability) of rational expectations equilibrium in a simple New Keynesian small open economy model. In particular, we extend Bullard and Mitra (JME, 2002) results of E-stability in closed economy to an open economy framework by evaluating Taylor-type rules. The main results are the following: a) the stability conditions under learning in open economies are isomorphic to the closed economy counterpart when the central bank targets contemporaneously either domestic price inflation or CPI inflation; b) the problem of instability under learning becomes more serious in open economies when the central bank reacts actively to expected consumer price inflation (CPI). Thus, unlike Bullard and Mitra (2002) the Taylor's principle does not necessarily induce both determinate and learnable rational expectation equilibria, where the degree of openness plays a crucial role c) it is easier for the economy to get into an unstable region when a central bank reacts to expected movements in the exchange rate along with an actively reaction to expected CPI inflation.

Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialised Economies

This paper examines the impact of exchange rates and import prices on domestic PPI and CPI in selected industrialised economies. The empirical model is a VAR incorporating a distribution chain of pricing. Impulse responses and variance decompositions indicate that these external factors have a modest effect on domestic price inflation over the post-Bretton Woods era. The pass-through is somewhat stronger in countries with a larger import share. A historical decomposition over 1996-98 indicates, however, that external factors have had a sizable disinflationary effect in most of the countries during the past couple of years. Estimating the model using post-1982 data has little effect on these conclusions.

The demand for broad money in Norway, 1969?1993

Cointegration analysis is applied to investigate the long run relationships between money, prices, and wages in Norway. Broad money is determined endogenously, and monetary balances were exposed to large shocks during the period of financial deregulation in the midst of the 1980s. In the long run these shocks are absorbed, and a long run demand for money relationship is identified in which real money is determined by real income, the relative price on financial assets (the yield spread) and the relative price on goods (the own real interest rate). Money adjusts dynamically to changes in the exchange rate and private wealth. Domestic price inflation is affected by improted inflation including currency depreciation (a pass through effect), domestic cost pressure (unit labour costs), and excess demand in the product market (output gap effect).

Exchange Rate Effects and Inflation Targeting in A Small Open Economy: A Stochastic Analysis Using FPS

In this paper, stochastic simulations of the Reserve Bank of New Zealand’s new macroeconomic model, FPS, are used to examine the issue of which price index should monetary policy stabilise in a small open economy. Under the class of policy rules considered, targeting a measure of domestic inflation, which does not include the direct effects of exchange rate movements on the price of imported goods, results in lower variability in real output, nominal interest rates, the exchange rate and domestic price inflation. The result is robust if direct exchange rate effects influence agents’ expectations of generalised inflation and if the policy maker is uncertain about how direct exchange rate effects influence expectations. Tracing out efficient policy frontiers under the two alternative targets illustrates that for a given level of CPI variability, output variability can be significantly reduced by targeting domestic price inflation.

Money Matters: Instability, Values and Social Payments in the Modern History of West African Communities

Introduction: the currency interface and its dynamics, Jane I. Guyer. Part 1 Pre-colonial currency dynamics: Raphia monies among the Teke, Marie-Claude Dupre cowries, gold and dollars - exchange rate instability and domestic price inflation in Dahomey, Robin Law. Part 2 Currency revolutions redescribed: the history and the adventures of a monetary object of the Kwele of the Congo, George Dupre monetization and the Asante state, Kwame Arhin. Part 3 Colonial situations in long-term perspective: the of Beti bridewealth, Jane I. Guyer currency instability and social payments among the Igbo of Eastern Nigeria 1890-1990, Felicia Ekejiuba money and informal credit institutions in colonial Western Nigeria, Toyin Faloa changes in marriage and funeral exchanges in Asante, Takyiwana Manuh. Part 4 Long-term themes in present situations: money, self-realization and the person in Yoruba texts, Karin Barber the state, the courts and value - caught between matrilineages in Ghana, Gwendolyn Mikell how Gambians save - culture and economic strategy at an ethnic crossroads, Parker Shipton the capitalization of money and credit in the development process in Nigeria, Akin L. Mobogunje. Part 5 Epilogue: stable prices, unstable values - some thoughts on monetization and the meaning of transactions in West African economies, Sara S. Berry.

Pricing in Australian Manufacturing*

The rate of change of prices of competing foreign products and the rate of change of costs of domestic production are both found to have positive impact on the rate of domestic price inflation in a cross section of Australian manufacturing industries over the period from 1968‐69 to 1986‐87. Prices of competing foreign products are found to have more impact, while production costs are found to have less impact, the higher is the level of domestic concentration, supporting the hypothesis that foreign and domestic competition have interactive effects on domestic prices.

Impact of Changing Structure of the Food Industries on Food Supply and Price

complete chain of industries producing inputs and commodities which are linked to processing and marketing of food; thus, the food sector includes the farm input, farm producer, and food processing, wholesaling, and retailing industries. The economic structure of the food sector is viewed in the traditional framework as the characteristics of industry organization, including the number and size distribution of firms as related to firm conduct and economic performance. The economic question that surfaces concerns the potential of the food sector, in its current economic structural formation, to contribute to domestic food shortages and price inflation. The purpose of this paper is to discuss (a) the economic structure of the food sector as it

Enkele beschouwingen over geimporteerde inflatie

Imported inflation, in the wide-open Dutch economy regarded as an important contributing force to domestic price inflation, is defined as to include all phenomena that, via external transactions, contribute to general price increases. It is argued that, as a contributing cause, imported inflation is not as prominent as is often thought and certainly not as important as domestic causes. This should not automatically lead to the conclusion that measures against imported inflation need not be taken. Even in the absence of such inflation, these measures, particularly a revaluation, may help stop the domestic price rises. It is argued that the familiar argument of revaluation having harmful effects for the balance of payments is not under all circumstances, and particularly current circumstances, correct.

A Monetary Budget

THE DRAWING UP OF BALANCE SHEETS for the monetary system1 has received increasing attention in many countries during the past few years. These balance sheets are particularly useful in helping to make short-term projections-which might be described as Monetary Budgets-that will indicate the monetary developments likely to accompany probable future fiscal and balance of payments experiences. The purpose of this paper is to illustrate, by reference to a hypothetical example, the practical usefulness of such a projection. The illustration proceeds by means of tables arranged in balance sheet form. The figures have no relation to the data of any actual country; they are no more than materials with which to demonstrate methods of working. It should also be said that the example has been simplified, and that many of the problems that exist in such work in real life have been omitted, in order to keep the illustration from becoming too lengthy. The main elements needed in an exercise of this kind are patience and arithmetic. For the purpose of the exercise, we imagine that we are in the Research Department of a Central Bank, and that we have been instructed to examine the monetary prospects for the coming fiscal year, say 1958-59, giving special attention to the measures needed to end the domestic price inflation that has been a constant source of trouble in the past few years. The low level of international reserves has also caused continual concern and has led to the erection of a complex structure of strict controls on international trade. It is hoped that the establishment of domestic price stability may be a first step toward easing and eliminating the restraints on trade. At the moment, the level of unemployment gives no particular cause for concern. The first step is to review the performance of the banking system in the past few years, and for this purpose Tables IA, IB, and IC are