The Assessment of National Price Levels

Irving B. Kravis and Robert Lipsey

No 1912, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper attempts to find norms for long-run national price levels,and therefore, by implication, for exchange rates, that are superior to those implied by the absolute or relative versions of purchasing power parity theory. The structural variables we have found to determine these price levels, real income per capita, the openness of the economy, and the share of tradables in total output, are used to explain price levels in periods since 1960 and to some extent since 1950.The results suggest that there was a movement toward a more "orderly" alignment of price levels, especially in the period before the 1970's. That is,national price levels came to be explained to an increasing degree by our structural variables. The price levels implied by the structural equations appear to come closer to representing long-run equilibrium levels than do those implied by purchasing power parity. The deviations from the structural equations seem to have value inpredicting future changes in price levels or real exchange rates,in conbination with changes in the structural variables. And they also contribute to predicting changes in the balance of trade.

Date: 1986-05
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Published as Kravis, Irving B. and Robert E. Lipsey."The Assessment of National Price Levels," Real-Financial Linkages among Open Economies, eds. Sven W. Arndt & J . David Richardson, Cambridge, MA: MIT Press, Fall 1987.
Published as Kravis, Irving B. and Robert E. Lipsey. "National Price Levels And The Prices Of Tradables And Nontradables," American Economic Review, 1988, v78(2), 474-478.

Downloads: (external link)
http://www.nber.org/papers/w1912.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1912

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1912

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().