Export Price Index Research Articles

Choosing the Correct Currency Anchor for a Small Economy: The Case of Nepal

This paper uses the Sjaastad model to estimate the optimal currency area for the Nepalese rupee and concludes that, currently, Nepal may be reasonably well off with its peg to the Indian rupee. As its economy opens and its trade base and trading partners expand, it may want to reevaluate whether moving toward an exchange rate basket including the U.S. dollar may be a better policy choice. The regression results indicate that, currently, the prices of imported goods in Nepal are solely influenced by India, suggesting that with the peg to the Indian rupee, Nepal can isolate the import side of its economy completely from external shocks. On the export side, the regression results indicate that Nepalese export prices seem, to a large extent, to be influenced by U.S. prices. However, the export price index had to be constructed, and the construction methodology is likely to entail an overestimation of the impact of the U.S. dollar.

Choosing the Correct Currency Anchor for a Small Economy: The Case of Nepal

This paper uses the Sjaastad model to estimate the optimal currency area for the Nepalese rupee and concludes that, currently, Nepal may be reasonably well off with its peg to the Indian rupee. As its economy opens and its trade base and trading partners expand, it may want to reevaluate whether moving toward an exchange rate basket including the U.S. dollar may be a better policy choice. The regression results indicate that, currently, the prices of imported goods in Nepal are solely influenced by India, suggesting that with the peg to the Indian rupee, Nepal can isolate the import side of its economy completely from external shocks. On the export side, the regression results indicate that Nepalese export prices seem, to a large extent, to be influenced by U.S. prices. However, the export price index had to be constructed, and the construction methodology is likely to entail an overestimation of the impact of the U.S. dollar.

Relative importance of scheduled macroeconomic news for stock market investors

This paper investigates the relative importance of scheduled U.S. macroeconomic news releases for stock valuation. The study focuses on 11 macroeconomic announcements selected on the basis of the previous literature and the Bureau of Labor Statistics classifications of major economic indicators. The paper shows that five out of the 11 announcements have significant influence on stock valuation. These are the Employment Report, NAPM (manufacturing), Producer Price Index, Import and Export Price Indices, and Employment Cost Index. Of these six announcements, the Employment Report and NAPM (manufacturing) exert the greatest influence. The time of the announcement, measured by days from the beginning of the month to the release day, has a moderating impact on the relationship between macroeconomic announcements and its importance.

The response of the US export prices to changes in the dollar's effective exchange rate: further evidence from industry level data

The relationship between the dollar's effective exchange rate and the export price indexes for 13 two-digit US manufacturing industries is analysed to determine (i) which industry adjusts its dollar export price to dampen or amplify the effect of the exchange rate fluctuations on the foreign-currency price of its exports and (ii) whether the response of the export price index to appreciation and depreciation of the exchange rate is asymmetric. For several industries, evidence consistent with dampening the foreign-currency price of exports in an asymmetric fashion is found. The implications of the results for the price competitiveness of the industries studied is discussed.

Compiling and Using Export and Import Price Indices

Export and import price indices are essential for assessing the impact of international trade on the domestic economy. Among their most important uses are analyzing developments in the trade balance, measuring foreign prices' contribution to domestic inflation, and deflating nominal values of exports and imports for estimating the volume of gross domestic product. This paper discusses the main uses of trade indices and the data sources used to compile them. It also presents various approaches used to compile foreign trade price indices, addresses various problems encountered in developing these indices, and provides some recommendations on how to address them.

Compiling and Using Export and Import Price Indices

Export and import price indices are essential for assessing the impact of international trade on the domestic economy. Among their most important uses are analyzing developments in the trade balance, measuring foreign prices' contribution to domestic inflation, and deflating nominal values of exports and imports for estimating the volume of gross domestic product. This paper discusses the main uses of trade indices and the data sources used to compile them. It also presents various approaches used to compile foreign trade price indices, addresses various problems encountered in developing these indices, and provides some recommendations on how to address them.

Keynes, Cocoa, and Copper: In Search of Commodity Currencies

This paper examines whether the real exchange rates of commodity-exporting countries and the real prices of their commodity exports move together over time. Using IMF data on the world prices of 44 commodities and national commodity export shares, we construct new monthly indices of national commodity export prices for 58 countries over 1980-2002. A long-run relationship between real exchange rates and real commodity prices is found for about two-fifths of the commodity-exporting countries. Also, the behavior of the real exchange rate of commodity currencies is found to be independent of the nominal exchange rate regime. The average half-life of adjustment of real exchange rates to commodity-price-augmented purchasing power parity is found to be about eight months, which is much shorter than Rogoff’s (1996) consensus estimate of three to five years, and provides an important missing piece of the PPP puzzle.

Keynes, Cocoa, and Copper: In Search of Commodity Currencies

This paper examines whether the real exchange rates of commodity-exporting countries and the real prices of their commodity exports move together over time. Using IMF data on the world prices of 44 commodities and national commodity export shares, we construct new monthly indices of national commodity export prices for 58 countries over 1980-2002. A long-run relationship between real exchange rates and real commodity prices is found for about two-fifths of the commodity-exporting countries. Also, the behavior of the real exchange rate of commodity currencies is found to be independent of the nominal exchange rate regime. The average half-life of adjustment of real exchange rates to commodity-price-augmented purchasing power parity is found to be about eight months, which is much shorter than Rogoff's (1996) consensus estimate of three to five years, and provides an important missing piece of the PPP puzzle.

Measurement of export prices and changes in product quality

In this paper, the economic theory of index numbers is applied to the construction of industry-level export price indices and export quality indices. These indices are used to make consistent comparisons of export prices and qualities at the same or different points in time. Evidence of quality change over time was found to be an important phenomenon in explaining the variation of unit value indices over time and across countries for some European Union trade flows. About half of the unit value differences among destination countries can be explained by quality differentials. The quality-corrected price indices are potentially useful in any empirical application in which accurate measures of export prices are needed.

A Framework for Price Statistics

This paper describes the primary framework associating the four principal price indices in the system of economic statistics—the Producer Price Index (PPI), the Consumer Price Index (CPI), and the Export and Import Price Indices (XPI and MPI)—with the macroeconomic value aggregates they decompose into price and volume components. The paper begins by defining the basic algebra of price indices. It then discusses the definition of the value aggregates comprising the goods and services components of the System of National Accounts 1993 (1993 SNA). The paper concludes by briefly considering purchasing power parities and labor compensation indices.

Do German, Japanese, and U.S. export prices asymmetrically respond to exchange rate changes? Evidence from aggregate data

This article estimates the responses (elasticity coefficients) of the export price index to appreciation and depreciation of the nominal effective exchange rate using quarterly data (1973:1–1997:2) for Japan, Germany, and the United States. Cross-country comparisons of the elasticity magnitudes based on the statistically superior of the estimated models indicate that Japanese exporters, in the aggregate, have the highest tendency to dampen the effects of exchange rate fluctuations on the foreign currency export prices in both directions by adjusting their home currency prices. Intracountry comparisons provide some evidence of an asymmetric adjustment in export prices in the cases of Japan and Germany.

A 'pricing-to-market' model with unobserved variables: explaining New Zealand's import prices

A model of ‘pricing-to-market’ (PTM) behaviour in import prices is developed for a small open economy to allow for two measurement problems: (i) that neither the marginal production cost of imported goods nor their corresponding (foreign-currency) export price are observable by the econometrician; (ii) that PTM behaviour, if it exists, alters the relationship between foreign countries' export price indices for total exports and the true, unobservable price index. The analysis shows that variations in the measured markup on import prices depends on the degree to which domestic demand is synchronized with world demand, whether bilateral exchange rate movements are due to domestic or foreign factors, and on the degree to which PTM behaviour differs from such behaviour in other countries. Equations estimated for the price of New Zealand (NZ) imports from the US strongly supports the model, and finds that the degree of PTM by US exporters in response to price and exchange rate movements is substantially greater in NZ than the average for other countries. However, the degree of PTM in NZ in response to excess demand is similar to that of other countries.

Stochastic long memory in traded goods prices

Using spectral regression and exact maximum likelihood methods, we test for long memory dynamics in the traded goods prices for the G7 countries, as measured in their import and export price indices. Significant and robust evidence of fractional dynamics with long memory features is found in both import and export price inflation rates.

Sectoral Price Movements under the Yen Appreciation

This paper analyzes the movements of tradable goods prices in Japan. The import price indices and the export price indices are matched with the domestic wholesale price indices at the most detailed level available for Japan, and the pricing behavior in the yen appreciation period (1985–1995) is examined. In the import-side analysis, we investigate how far the price movements under currency appreciation deviate from the law of one price. We find that internal–external price differentials have surprisingly expanded for most of the products since 1985. For a number of commodities, the import prices do not decline as far as the exchange rate appreciates, and the domestic wholesale prices do not decrease as far as the import prices decline. Although the expanded price gaps cannot necessarily be interpreted as a result of deliberate trade barriers, they suggest that some sort of handicap is imposed on imported goods and the large fraction of rent generated by the yen appreciation is intercepted in the middle. In the export-side analysis, the relationship between the globalization of firms' activities and export pass-through is investigated. Our cross-sectional regression analysis indicates that the export path-through rates tend to be low when the value added ratios of foreign production of Japanese firms are high. Low export pass-through under currency appreciation is often interpreted as a result of firms' attempts to keep their foreign market share, but the globalization of firms' activities may be another important factor in lowering the pass-through.J. Japan Int. Econ.,December 1997,11(4), pp. 611–641. Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108, Japan.

Measuring External Shocks to the City Economy: An Index of Export Prices and Terms of Trade

This paper details the construction of an index of export goods prices (the Export Price Index or EPI) for a panel of 196 metropolitan areas from 1977 to 1992. The EPI is an indicator of external demand shocks to the city economy which does not suffer from the causal ambiguity of the endogenous indicators such as income, employment or output. The creation of an index of aggregate export prices, the EPI, for the panel of areas provides both academicians and policy analysts with a new exogenous indicator that identifies demand price innovations and the terms of trade shocks to cities.

The Responses of U.S. Firms to Exchange Rate Fluctuations: Piercing the Corporate Veil

IN THE MID-1980s, when the dollar declined from its record highs, observers impatiently waited for the U.S. trade balance to respond. In the short run, instead of improving, the deficit continued to erode. Among economists, this sparked considerable research of both an empirical and theoretical nature. The empirical research appeared to uncover important differences in the behavior of U.S. and foreign firms that helped explain the sluggish response of the U.S. trade balance. U.S. exporters, it appeared, fixed their export prices in dollar terms and fully passed the exchange rate effects through into their foreign currency prices; indeed, as figure 1 shows, between 1985 and 1989 the U.S. export price index compiled by the Bureau of Labor Statistics (BLS) moved precisely in line with the domestic wholesale price index. ' As Paul R. Krugman and Richard E. Baldwin observe, this implied that measured in dollars, any

The Volume and Price of Indonesian Exports, 1823 To 1940: The Long-Term Trend and its Measurement1

This article is concerned with indices of export volume and prices in Indonesia from 1823 to 1940. It discusses the sources from which the quantitative information on exports is derived. Previous indices are shown and their shortcomings are considered. Next, Laspeyres quantity indices and Paasche unit value and price indices for agricultural and total exports are presented. These indices are based on fixed weights for eight sub-periods. The paper also discusses the features and shortcomings of the more sophisticated Divisia index, and concludes with some remarks on the long-term trend of exports from Indonesia.

The experience of the EEC Eurolink Project in modeling bilateral trade linkage equations

Following the basic philosophical approach of the LINK Project, which links various national econometric models built in different countries, the Commission of the European Communities has succeeded in linking the full-size quarterly econometric models of the four major European countries. The Eurolink Project is being extended to cover the other EEC countries as well as the United States, Canada, and Japan. The results reported in this paper are part of this larger project which attempts to link the EEC member economies in a trade and capital flows econometric model and explain the transmission of interdependent economic fluctuations from country to country. In the present study, the interconnection between the various economies is represented by bilateral trade flows only. Flows of invisibles and of financial capital are not completely studied and are not yet ready to be included in this report. The theoretical structural model with its bilateral trade supply and demand functions and the technique employed for the construction of bilateral import and export price indices are presented. Estimation results are shown and discussed with emphasis on their use for the analysis of international trade and for policy decision making.

The Pacific basin in world trade an analysis of changing trade patterns, 1955–1975

This is the third of a sequence of papers on international flows of trade among fifteen Pacific Basin (PB) countries and between them and eleven regions in the Rest of the World (ROW). In Part I of the sequence (Hickman, Kuroda and Lau, 1977a) we presented and documented annual data on bilateral flows of total exports valued f.o.b. in current dollars among the twenty-six countries and regions for the years 1948 through1975. The primary data source is the Direction of Trade computer tape of the International Monetary Fund, but these data were supplemented from other sources, especially as regards the international trade of the socialist countries. The second report (1977b) extended the data base to include unit value export price indexes and the corresponding constant dollar trade flow matrices for the period 1955-1975. In this third report we analyze the changing pattern of PB trade over the same period, using as tools export growth decomposition indexes, trend analysis, and regression analysis of the price elasticity of import market shares. The present paper is organized as follows. In Section 2 we describe the trends in the export performance of the PB countries and ROW regions, as measured by the cumulative percentage change in each country's share of world exports between 1955 and 1975 and for selected sub periods. In Section 3 and Appendices B and C these export share changes are decomposed into three sources: changes in the degree of penetration of the various import markets, changes in the size of the import markets themselves, and an interaction effect. The decomposition indexes are shown in Section 4 to be dominated by the market penetration or competitiveness effect, so that a country gains or loses in world trade according to whether or not it can increase its shares of the markets in which it sells rather than as a passive result of changes in the size of the markets themselves. This leads to a descriptive analysis in Section 5 of the secular growth rates of the market shares of each country or region in the import markets of the twenty-five remaining countries and regions. Finally, we conclude the paper in Section 6 with art exploratory regression analysis of the responsiveness of the market shares to changes in the relative prices of the various exporting countries competing in each import market, leading to the general conclusion that relative prices do matter and presenting estimates of share or substitution elasticities in the various import markets.

Preis- und Wechselkursindizes f�r den Export �sterreichischer Halb- und Fertigwaren

The purpose of this article is to describe the computation of various export price and effective exchange rate indices for the Austrian exports of manufactured goods, considering especially the competition of other exporting countries on the relevant markets (including domestic production alternatively) and to present the development of these indices during the decade 1963 to 1973.