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31. International Relative Price Levels: A Look Under the Hood

Author:
Jaime Marquez, Charles Thomas, and Corinne Land
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the structure of international relative price levels using purchasing power parities (PPP) at the product-level from the 2005 World Bank’s International Comparison Program (ICP). Our examination is motivated by questions arising from two applications using economy-wide PPPs: the measurement of real effective exchange rates (REERs) and the correlation between prices and development. Specifically, how would our view on competitiveness be affected if one were to use PPP measures that exclude non-tradable categories? Is it the case that an increase in per-capita income raises the prices of non-tradable categories? These questions are not new. What is new here is the use of relative price levels (as opposed to indexes) at the product level for 144 countries that differ greatly in their level of development.
Topic:
Development, International Trade and Finance, Exchange Rate Policy, Strategic Competition, and Price
Political Geography:
Global Focus

32. Interest Rates and the Volatility and Correlation of Commodity Prices

Author:
Joseph W. Gruber and Robert J. Vigfusson
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We propose a novel explanation for the observed increase in the correlation of commodity prices over the past decade. In contrast to theories that rely on the increased influence of financial speculators, we show that price correlation can increase as a result of a decline in interest rates. More generally, we examine the effect of interest rates on the volatility and correlation of commodity prices, theoretically through the framework of Deaton and Laroque (1992) and empirically via a panel GARCH model. In theory, we show that lower interest rates decrease the volatility of prices, as lower inventory costs promote the smoothing of transient shocks, and can increase price correlation if common shocks are more persistent than idiosyncratic shocks. Empirically, as predicted by theory, we find that price volatility attributable to transitory shocks declines with interest rates, while, particularly for metals prices, price correlation increases as interest rates decline.
Topic:
Economics, Commodities, Interest Rates, and Price
Political Geography:
Global Focus

33. Shrinking and Growing Metropolitan Areas - Asymmetric Real Estate Price Reactions?

Author:
Lisa Dust and Wolfgang Maennig
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Chair for Economic Policy, University of Hamburg
Abstract:
The population of Germany will be one of the first in the western hemisphere to undergo considerable permanent shrinkage. In view of the relatively low elasticities of supply and demand significant negative price reactions might be expected. This work supplements existing studies by estimating real estate prices for single-family homes on the disaggregate level of Germany’s metropolitan areas. It highlights asymmetric price reactions: growth in population numbers has no significant price effects, whereas declining population numbers lead to significant negative price effects.
Topic:
Demographics, Economics, Population, Real Estate, and Price
Political Geography:
Europe and Germany