Increase In Price Level Research Articles

Does Price Level Increase Income Inequality in Pakistan? A Disaggregated Analysis

The crucial emphasis of economic policies is to enhance socio-c wellbeing of the people in an economy. If the society is economically polarized it hampers the impact of economic policies. The crucial economic problem about which fewer economists gutsy to talk is income inequality in the world because it is the answer to a pinching question that who will benefits from the economic growth in an economy. Despite the generation of trillions of dollars each year in the world, a huge population is deprived of basic needs such as food, sanitation, security, health and education etc. When it comes to the effect of inflation on masses the situation further aggravates. Escalated price levels deprive more people from essential goods and lead towards increasing income inequality. This study has tried to estimate the impact of inflation on income distribution in Pakistan. The data was collected from Pakistan Economic Survey and Handbook of Statistics by SBP for a period of 1990 to 2022. The present study has applied Auto Regressive Distributed Lag Model (ARDL) to estimate the linkage among price levels and income inequality in Pakistan. The findings of the study have revealed both positive and negative linkage among constituents of the CPI and the income inequality. The novelty of this study is on two grounds. Firstly, the study has dissolved Consumer Price Index (CPI) into its constituents, and their Impact on income inequality has been examined, as far as finest information available to us this has never been investigated in Pakistan before. Secondly, the study has applied two proxies the GINI coefficient and Mean Log Deviation (MLD) to estimate income inequality. Thirdly, we have applied the data splicing method[1] to make one base year of CPI from various base years that has been changed over the past years in Pakistan. The study offers some useful policy implications for policy formulation in Pakistan.

THE WAR IN UKRAINE, CLIMATE CHANGE AND VIRAL INFECTIONS: IMPACT ON GEO-ECONOMIC SHIFTS IN THE GLOBAL ECONOMY

The war in Ukraine, global warming that has been talked about for the last five years, and the COVID-19 pandemic have a special effect and shift the processes in the world economy. The Russian Federation’s military invasion of Ukraine on February 24, 2022 complicated the already unstable geopolitical situation and its consequences in terms of human losses and impact on the world economy, which is also under pressure from the sanctions imposed against the Russian Federation and the deterioration of energy situation. The crisis is yet to be fully assessed. Growth forecasts for the largest economies have been revised downwards, since the turmoil in financial and commodity markets caused by the war in Ukraine may persist for many years. It is also difficult to predict the impact of the consequences of war and the sharp increase in price level on the world market. Global problems of world development can be divided into two main groups. The first one includes conceptually significant problems that require the study of social certainty and need to be addressed (conceptual uncertainty of resources’ role and value, the absence of a global model of relations between countries, destructiveness in international relations, the imbalance in amount of resources in countries), and the second – practical problems that need maximum limiting and the soonest possible solution in the future (asymmetry in quality of life in countries, destruction of human resources and man-made technological impact). Digitization is becoming fundamental because it affects security. Today we live in a world of global cyber attack and see that computational methods are used in modern warfare. Therefore, digitization is a key condition for the national security of any bloc and any country.

Down to the cents: The case of international drug prices

Using drug prices from the Veteran Affairs office, we document limited clustering on whole dollars and heightened strategic pricing. Surprisingly 97.9% of drugs over $10,000 are priced down to the cents. We find no significant variations in clustering by price levels or uncertainty, rejecting the negotiation hypothesis. Strategic pricing on 01 and 99 increases monotonically as prices decline. For international drug prices, we find significant clustering on integers in Luxembourg and South Africa as price level increases, supporting the negotiation hypothesis. Our findings contribute to better negotiating drug prices to reduce healthcare costs while not discouraging innovations in drug development.

People’s Perceptions of Inflation (A Survey Data Analysis)

In this paper, we have presented our results from an online survey on people's perceptions of increase in price level, conducted by the authors. Based on the results, we have drawn conclusions and constructed some hypotheses which need further research to get a solid foundation. The survey has tried to explore three aspects of the associated perceptions: whether the respondents are aware of the increase in daily commodity prices or not, the reasons behind the increase in price level and the state of price level that is appropriate for the economy of Bangladesh.People’s expectations of inflation shape the future inflation of an economy. Similarly, people's take on inflation can help them build their expectations of future inflation. Therefore, studying the perspectives is important to get a more clarified picture of the future inflation. It can also help while formulating policies to control the price level or other associated macroeconomic variables. Additionally, the inspection can be a great assist to illustrate the behavioral glitch of the respondents in terms of the relation to the macroeconomic picture.We have tried to show the responses on the questions in terms of the age groups and groups consisting of respondents who have or do not have prior formal knowledge of Economics. An interesting behavior noticed in the case of the people with economics background is that their behavior is inconsistent with the modern economics theory.Age groups are divided into four categories. The research data shows that the majority of the respondents support the idea that bad governance has given them a reason to expect inflation. The least supported reason is the effect of monetary policy. People do not tend to think that much about the impacts of monetary policy. COVID-19 pandemic leads a moderate number of respondents to formulate their perceptions on inflation. A highly negligible portion of respondents has said that they were not aware of the recent increase in the price level of daily commodities. A few hypotheses have also been developed from the analysis, which are mentioned in the discussion section. Further investigation is necessary to establish a statement in these cases.An interesting fact derived from this survey is that an important portion of people thinks that an increase in the price level to a limited extent is good for the economy of Bangladesh. Except for age group 3 (31-40), majority of all the groups support this idea. However, this inconsistent behavior among the age group 3 can be neglected since the more responses are necessary to establish this inconsistency as a significant issue. The second most supported appropriate inflationary state for the respondents is the decrease in price level.The responses were collected through Google Form. The data analysis and cleaning were performed using spreadsheet software.

Does fiscal stance affect inflation expectations? Evidence for European economies

According to the fiscal theory of the price level, in a non-Ricardian regime, high public debt should lead to a price-level increase so as to fulfill intertemporal government budget constraint. Forward-looking agents should anticipate this rise by pushing up their inflation expectations. This study tests the above hypothesis by analyzing the impact of fiscal sustainability on the formation of inflation expectations by private-sector agents – consumers and professional forecasters – in European countries. In the study, we estimate models of inflation expectations, and we include public debt among the explanatory variables. The novelty of this study lies in our analysis of whether the relationship between public debt and inflation expectations is affected by the degree to which fiscal policy is sustainable in European economies. We find that fiscal stance influences the inflation expectations of consumers and professional forecasters. Contrary to intuition, the reaction of consensus economic forecasts to public debt in countries with sustainable fiscal policies seems stronger than in economies with less disciplined fiscal policies. This may suggest that fiscal authorities are constrained by the way in which private-sector agents form their expectations, conducting more responsible fiscal policy in countries where the reaction of economic agents to fiscal variables is stronger.

Pan-European CVaR-Constrained Stochastic Unit Commitment in Day-Ahead and Intraday Electricity Markets

The fundamental modeling of energy systems through individual unit commitment decisions is crucial for energy system planning. However, current large-scale models are not capable of including uncertainties or even risk-averse behavior arising from forecasting errors of variable renewable energies. However, risks associated with uncertain forecasting errors have become increasingly relevant within the process of decarbonization. The intraday market serves to compensate for these forecasting errors. Thus, the uncertainty of forecasting errors results in uncertain intraday prices and quantities. Therefore, this paper proposes a two-stage risk-constrained stochastic optimization approach to fundamentally model unit commitment decisions facing an uncertain intraday market. By the nesting of Lagrangian relaxation and an extended Benders decomposition, this model can be applied to large-scale, e.g., pan-European, power systems. The approach is applied to scenarios for 2023—considering a full nuclear phase-out in Germany—and 2035—considering a full coal phase-out in Germany. First, the influence of the risk factors is evaluated. Furthermore, an evaluation of the market prices shows an increase in price levels as well as an increasing day-ahead-intraday spread in 2023 and in 2035. Finally, it is shown that intraday cross-border trading has a significant influence on trading volumes and prices and ensures a more efficient allocation of resources.

Relationship Between Transport Infrastructure Development and Price Formation

The paper suggests a bidirectional nexus between transport infrastructure and price formation. It is argued that the link between these two factors is not only through microeconomic effect that transport infrastructure development has on pricing, but also that it can be analyzed from the macroeconomic perspective. Hence, the article is aimed at investigating the bidirectional nexus between transport infrastructure and price formation. The main hypotheses of the research are the following: (1) Macro- and macroeconomic effects are different with respect to the sign of their influence; (2) Microeconomic effect is described by the negative effect of transport infrastructure development on price level; (3) Macroeconomic effect is perceived as a positive influence of price level increase on transport infrastructure development. Therefore, it is assumed the link between transport infrastructure and price formation is bidirectional: transport infrastructure has a negative effect on price formation, whereas price formation positively impacts transport infrastructure development. To test the hypothesis, analysis was conducted of 118 countries of different economic, social and political systems with the use of panel regression. The panel data for 2009-2018 years was used. The results indicate the presence of the said bidirectional link and prove the hypotheses set. Transport infrastructure development, represented by transport infrastructure score through the global competitiveness index, leads to reduction in price level, measured by the conversion factor of purchase power parity to exchange rates. In contrast, an increase in price level positively impacts transport infrastructure development. The nexus of transport infrastructure and price formation is explained through two directions: 1) from specific to general (including price fall by transport capacity increase – microeconomic effect); 2) from general to specific (as a social development level that determines the efficiency of management processes, in transport and logistics – macroeconomic effect).

Real estate boom in Chile and fundamentals on house prices

This article studies the fundamentals of housing prices based on the Real Index of Housing Prices (IRPV), given that in recent times in Chile there has been a sustained increase in price levels and seeks to find evidence on the existence of a possible speculative bubble in the real estate market. Following the methodology of various Chilean and international authors, the Engle & Granger Co-integration methodology was applied. Furthermore, the results of the previous methodology were compared using the Johansen Co-integration test. Then a method to find structural breaks is applied. As a result, evidence is found to not reject the existence of a bubble in the real estate market. It is found that only interest rates co-integrate in the long term with the evolution of house prices, while the other fundamentals present a spurious relationship.

MODELING ENERGY SECURITY–EXCHANGE RATE LINKAGE: EVIDENCE OF GMM APPROACH

This study is an empirical attempt to revisit energy insecurity in Vietnam by focusing on the role of the official exchange rate. To this end, we gathered data of the related variables based on the 4A’s theory for energy security over the period 1985–2017, and conducted estimation using GMM estimator. The major results proved that economic growth has a positive impact on official exchange rate. CO2 emissions have negative coefficient which means negative relationship between this variable and the Vietnam’s official exchange rate, while inflation rate has a negative sign suggesting that by increase in price level of commodities in Vietnam’s economy, the domestic product will be more expensive than that before which accelerates commodities import flows that leads to depreciation of Vietnam’s national currency. In addition, we found out that energy intensity has a negative relationship with official exchange rate in Vietnam. Moreover, the results revealed that a 1% increase in gas import has a negative linkage with the Vietnam’s official exchange rate. According to the results, we recommend that Vietnam needs to diversify its gas imports, strengthen local energy production, increasing energy efficiency to have a stronger national currency against U.S. dollar which ensures energy security in this country.

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When Does Partitioned Pricing Lead to More Favorable Consumer Preferences?: Meta-Analytic Evidence

Evidence of the impact of partitioned pricing is contradictory. Research indicates that partitioning a price into multiple components can result in more favorable preferences, due to a lower recalled price, or less favorable preferences, due to unfavorable surcharge evaluations. To explain these divergent effects, the authors examine the role of price presentation moderators, which reflect how managers convey prices to consumers (e.g., Is the total price present or absent?), magnitude moderators, which reflect the actual prices charged (e.g., What is the surcharge magnitude?), and contextual moderators, which reflect nonprice transaction characteristics (e.g., Is the product category hedonic or utilitarian?). A meta-analysis of 17 years of partitioned pricing research examining 149 observations in 27 papers (N = 12,878) suggests that consumers respond more favorably to partitioned pricing than to all-inclusive pricing when the total price is absent, as the price level increases, when the surcharges are typical for the product category, when the surcharges are perceived as offering high benefit, and when the product category is utilitarian.

The Macroeconomic Effects of Sovereign Risk Premium Shock: A Case Study for Turkey

The macroeconomic effects of sovereign risk premium shocks in Turkey are investigated by employing Structural Vector Autoregression Model for the period 2005:12 - 2017:3. The model includes EMBI+TR as an indicator of sovereign risk premium for Turkey. The empirical results of the model indicate that structural shocks in sovereign risk premium affect macroeconomic variables negatively in Turkey. One standard deviation shock in EMBI+TR results in devaluation of Turkish Lira, increase in price level, contraction in credit volume, decline in industrial production index and increase in current account balance. The impact of the negative changes in the sovereign risk premium on the exchange rate and the credit is higher compared to the other variables. It is concluded that results from variance decomposition are consistent with the results of the impulse - response analysis and the impact of structural shocks in sovereign risk premium on credit is higher compared to other variables.

When Does Partitioned Pricing Lead to More Favorable Consumer Preferences? Meta-Analytic Evidence

ABSTRACT There has been contradictory evidence regarding the impact of partitioned pricing. Research has shown that partitioning a price into multiple components can result in more favorable preferences due to a lower recalled price, or less favorable preferences due to unfavorable surcharge evaluations. To explain these divergent effects, the authors examine the role of price presentation moderators, reflecting how managers convey the prices to consumers (e.g., is the total price present or absent?), magnitude moderators, reflecting the actual prices charged (e.g., what is the surcharge magnitude?), and contextual moderators, reflecting non-price transaction characteristics (e.g., is the product category hedonic or utilitarian?). A meta-analysis of 17 years of partitioned pricing research examining 149 observations in 27 papers (N = 12,878) suggests that consumers respond more favorably to partitioned pricing than all-inclusive pricing when the total price is absent, as the price level increases, when th...

Does ICT diffusion matter for corruption? An Economic Development Perspective

This study assess the impact of ICT diffusion on corruption by using instrumental variables method on a panel data set of 175 countries over the period 1996–2014. We check for the stability of the ICT-corruption nexus for different levels of economic development. Our results show that ICT diffusion clearly acts as an effective tool to control corruption. The study also reports that as the countries develop economically they improve their corruption level. Moreover, as per the per capita GDP, estimation outcomes suggest that both trade openness and better institutions are associated with lower corruption levels. However, results show robust support to suggest that as the general price level increases, bribery increases. This effect is more pronounced for the developing countries than for developed ones, which may witness higher inflation rates and therefore a higher cost of living. Drawn on our results, our study addresses important insights and policy implications mainly for developing countries.

Determinants of Market Value for Condominium Properties: Case Study in Dehiwala, Colombo.

Sri Lanka is one of the fastest growing economies in Asia. In this growing environment, the real estate market has shown a significant growth, with an increase in price levels of real estate assets. The high value segments in this market are luxury apartments and condominium sector. Condominium market shows a significant extend over the past two to three years. Urbanization, land shortage are the main reasons for the increased demand of the condominiums, particularly in the Western Province. When compared to value of real properties, condominiums have higher market value than other real properties. To monitor the condominium market, the first issue is to understand what are the determinants of market value for the condominium properties. There are number of factors affecting the market value of condominiums. Based on these factors market value will be changed from one property to another property. Property market buyers and sellers are highly depending on these factors, when buying and selling condominium units. Therefore, it is important to identify current condominium property market and factors affecting market value of condominiums. This research conducting based on Dehiwala Mount Lavinia Municipal Council Area. Participants in this survey were condominium housing unit owners in selected case study area. From 650 condominium units, 120 units are randomly selected. Findings of this study highly depend on primary data and it collected from the Structured Questionnaires and Field Visits. Each participant was given a questionnaire which contains demographic information and determinants of market value of condominium properties. Determining criteria divided in to 5 major categories and respondents are select one item from 5-point scale ranging from strongly agree to (1) strongly disagree (5). The data analysis of the study is presented descriptively. Location is the most significant factor to determine the market value of condominium properties. In additionally, Neighborhood and Community factors are highly affecting to determine the market value of condominium properties.

Response of macro variables of emerging and developed oil importers to oil price movements

This paper assesses the impact of crude oil price movements on two macro variables, the gross domestic product (GDP) growth rate and consumer price index inflation rate, in the developed economies of the United States and Japan, and an emerging economy, the People's Republic of China (PRC). These countries were chosen for this research because they are the world's three largest oil consumers. The main objective of this study is to see whether these economies are still reactive to oil price movements. The results obtained suggest that the impact of oil price fluctuations on developed oil importers’ GDP growth is much lower than on the GDP growth of an emerging economy. The main reasons for this lie in fuel substitution (higher use of nuclear energy, gas, and renewables), a declining population (for Japan), the shale gas revolution (for the United States), and strategic oil stocks and government-mandated energy efficiency targets in developed economies. All of these factors make developed economies more resistant to oil shocks. On the other hand, the impact of oil price movements on the PRC's inflation rate was found to be milder than in the two developed countries that were examined. The main cause for this is that the PRC experiences a larger forward shift in its aggregate supply due to higher growth, which allows it to avoid a massive increase in price levels following oil price shocks.

The effect of the economic crisis on the behaviour of airline ticket prices. A case-study analysis of the New York–Madrid route

The effect of external factors such as the economic situation on airline ticket price behaviour has not been examined in the specialised literature. In this paper, we analyse the effect of the economic crisis on the behaviour of the prices offered via several types of intermediaries over time. We chose to examine the Madrid–New York route because of its high demand which provides us with a sufficient number of flights and it is used for both business and leisure trips. We used round-trip fares posted on-line, from two months prior to departure, in order to replicate real travellers’ behaviour when making reservations. We chose flights in 2009 and 2013 departing on 18th June and returning eight days later on 26th June, in order to avoid peak holiday times. The results show that the economic crisis has affected price behaviour both in terms of price level and dispersion, with a clear increase in price level and decrease in price dispersion. Moreover, the economic crisis has reduced the usual marked increase in average price that takes place as the flight departure date approaches.

The Response of Macro Variables of Emerging and Developed Oil Importers to Oil Price Movements

This paper assesses the impact of crude oil price movements on two macro variables — the gross domestic product (GDP) growth rate and consumer price index inflation rate — in the developed economies of the United States and Japan, and an emerging economy, the People’s Republic of China (PRC). These countries were chosen for this research because they are the world’s three largest oil consumers. The main objective of this study is to see whether these economies are still reactive to oil price movements. The results obtained suggest that the impact of oil price fluctuations on the GDP growth of the developed oil importers is much lower than on the GDP growth of the emerging economy. The main reasons for this lie in fuel substitution (higher use of nuclear energy, gas, and renewables), a declining population (for Japan), the shale gas revolution (for the United States), and strategic oil stocks and government-mandated energy efficiency targets in developed economies. All of these factors make developed economies more resistant to oil shocks. On the other hand, the impact of oil price movements on the PRC’s inflation rate was found to be milder than in the two developed countries that were examined. The main cause for this is that the PRC experiences a larger forward shift in its aggregate supply due to higher growth, which allows it to avoid a massive increase in price levels following oil price shocks.

Test of relationship between Exchange Rate and Inflation in South Sudan: Granger-Causality Approach

Using Granger-causality approach, this study was intended to establish the relationship between exchange rate and inflation measured by CPI in South Sudan using time series monthly data for the period August 2011 to November 2014. The study reveals that there exists a unidirectional causality from exchange rate to CPI without feedback. This means depreciation of South Sudanese currency is detrimental to the economy of South Sudan. Although CPI failed to cause changes in exchange rate, there is no way to conclude with greater confidence that the results are true. The effect of the pressure of an increase in price level on exchange rate could have been from the response of monetary authorities in bridging the gap between the price level and the purchasing power of people in the economy. In South Sudan, with no response from the monetary authorities to increase money supply, the effect of increase in prices on exchange rate has been suppressed and only manifests itself in terms of suffering encountered by the economic actors with consumers and mainly the low-income consumers hit hard.Given the results, there is a need for the authorities to manage the exchange rate and save the domestic currency from depreciation. In search of more information, the study recommends further research to be conducted with the aim of establishing the weaknesses and strengths of South Sudan Central Bank management in carrying out effective monetary policies in the country.

Modelling growth and revenue for Swedish hotel establishments

This paper provides first estimates of the determinants of output growth of Swedish hotels based on establishment data. Growth of overnight stays is modelled as a function of initial size, age, type of accommodation, location and hotel prices measured as average revenues per guest nights. The empirical model accounts for potential endogeneity of hotel prices through the two-stage least absolute deviation model (2SLAD) and the instrumental variable quantile regression method. 2SLAD estimates show a positive and significant relationship between hotel prices and subsequent growth. The relationship is nonlinear with a decreasing impact as the price level increases. Growth of establishments is significantly higher for smaller and younger hotels. An important result is that city hotels, in comparison to tourist and other hotels – which are mainly located outside urban areas (in the mountains and at the sea) – exhibit significantly higher growth rates with a gap between 2.2 and 3.4 percentage points. Furthermore, the positive impact of hotel prices on growth is larger for high-growth establishments. Accommodation prices significantly decrease with the number of local competitors with a non-linear form and increase with size. City hotels and accommodation in the capital city have the highest revenues per guest night.