Empirical work on the division of real output and prices into tradable and nontradable components has not kept pace with theoretical developments. The conventional proxies of prices and productivity by tradable and nontradable sector are examined and found deficient in several important respects. It is demonstrated that an approach that relies on the long–standing data on gross domestic product by industry of origin can overcome some of these deficiencies. These data are used to construct new annual measures of prices and productivity for tradable and nontradable output for 12 industrial countries over the period 1950–73. While far from precise, the new measures are consistent with the following criteria for distinguishing between tradables and nontradables: the degree of foreign trade participation should be higher for tradables than for nontradables; the degree of international commodity arbitrage, as measured by cross‐country correlations of price changes, should be higher for tradables than nontradables; and tradables should be closer substitutes than nontradables for traded goods from other countries (imports).
Despite the considerable conceptual advantages of the new measures of prices and productivity over the conventional proxies, correlation analysis indicates that the new and old measures usually move together rather closely in our 12 subject countries. The correlations are higher across the alternative relative productivity measures than for the alternative relative price measures.
The consumer price index series in the Historical Statistics of the United States, millennial edition, is improved via construction of a new long-run consumer price index series. For a component series, the author uses a neglected series developed by Paul Douglas. Although differences between the Historical Statistics series and the new series are not large, the Historical Statistics series nevertheless exhibits both conceptual and computational weaknesses when compared with the new series. Furthermore, the Historical Statistics series systematically diverges from the new series. In effect, the Historical Statistics series has two segments, which are improperly linked. Empirical evidence suggests the superior representativeness of the new series.
Officer begins this book with a historical perspective of the monetary standards of the United States and Britain. He then develops data on exchange rates, mint parity and gold points, with which he investigates three important features of Anglo-American monetary history. First, the integration of the American foreign-exchange market over time. Second, it is proved that gold-point arbitrage is markedly more efficient than either interest arbitrage or forward speculation. Third, regime efficiency is explored from standpoints of both private agents and policy-makers; the 1925–1931 gold standard, though less durable than the pre-war standard, is nevertheless shown to be surprisingly stable. The book will serve as a Dollar-Sterling handbook for those interested in this important aspect of international monetary history.
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