A Model of Real National Price Levels

International Comparisons of Real Product, 1820–1990: An Alternative Data Set

“…Later, Clague (1986aClague ( , 1986b investigated, for a sample of 31 countries in 1975 (ICP Phase III), the extent to which differences in country rankings derived from choosing the PPP or the exchange rate as a converter of national GDP into a common currency (US$) could be attributed to the endowment of natural resources (share of minerals in GDP), the international position of a country (as measured by the trade balance and tourist receipts), productivity differentials in services (proximated by educational attainment level), and macroeconomic policies (measured by the growth of money supply). A further exploration for a 60-country sample was carried out by Clague (1988) for 1980 (ICP Phase IV). The latest attempt to provide short-cut alternatives to the KHS method has been carried out by Ahmad (1996) for different data sets from ICP Phases III, IV, and V (covering 34, 60, and 56 countries in 1975IV, and V (covering 34, 60, and 56 countries in , 1980IV, and V (covering 34, 60, and 56 countries in , and 1985, firs separately and then pooled.…”

“…can be predicated (Clague (1985(Clague ( , 1986a), although it could be argued that, in addition to equalizing the prices of tradables, trade raises the price of abundant factors and, thus, affects prices of nontradables. 34 Hence, the direction of the relationship between openness and the price level will depend on whether capital or labor is the relatively abundant factor (Kravis and Lipsey (1987)).…”

“…Thus it allows for changes in the relationship between the price level and nominal per capita income and the rest of explanatory variables over time. 43 Estimation with panel data techniques has the advantage of increasing the degrees 40 Clague (1988), p. 241, emphasized, however, a positive relationship between country size and the price level if increasing returns to scale are assumed for tradable production but not for nontradable production. 41 The AMR dummy could be seen as a compromise for the out of sample years since from the exchange rate point of view, the Bretton Woods epoch has been associated with the Classical Gold Standard era and the post-Bretton Woods years might be an acceptable aproximation for the Interwar years.…”

“…Against this view, Clague (1985Clague ( , 1986a argued that import restrictions are associated with higher price levels and, thus, the more open an economy, that is, the lower its import barriers, the lower its price level should be. 16 Kravis and Lipsey (1987, 100) qualifie KHS earlier views by admitting, along HeckscherOhlin lines, that ''trade not only operates directly in pulling prices of tradables toward greater uniformity but affects the price of non-tradables by tending to raise the price of relatively abundant factors'' and the direction of the price levelopenness relationship varies with factor proportions.…”

The Penn Effect and Transition: The New EU Member States in International Perspective

“…On the other hand, a number of (former) transition countries, especially in the CIS, are oil and gas exporters where related Dutch disease phenomena might drive up comparative prices. In terms of a theoretical foundation, Clague (1985) proposes that within a specific factors model increases in the endowment of specific factors -one of which is natural resources -lead to higher comparative price levels, as do productivity increases.…”