How weak are the signals? International price indices and multinational enterprises

International price indices (IPIs) provide the most timely and comprehensive market information available to international business. How do multinational enterprises (MNEs) affect the validity of IPIs? We review the earlier debate over methods for calculating IPIs, which concluded that unit values were inferior to specification prices, although most governments produce only unit value indexes. We explore three ways in which MNEs can affect the validity of IPIs: determining the ‘representative’ transfer price, excluding intrafirm transactions from the index, and choosing the ‘right’ transfer price along the transportation chain. We argue that MNE activities strengthen the case for specification prices; although still uncommon, they are the stronger signal of international markets. Our empirical analysis supports this hypothesis, finding that a 10% increase in the intrafirm trade share of US imports widens the gap between specification price and unit value by 1.3%, with transfer price manipulation further increasing the gap. Journal of International Business Studies (2004) 35, 61–74. doi:10.1057/palgrave.jibs.8400069

Relative prices and inflation: new evidence from different inflationary contexts

This paper analyses the relationship between inflation and relative price variability, in the direction of the latter, in two countries with very different inflationary experiences: Argentina and Spain. To address this objective, using disaggregated price indexes (the Wholesale Price Index for Argentina and the Consumer Price Index for Spain), we delimitate different inflationary regimes and compute a set of regressions for each country. Our results suggest evidence in favour of the non-neutrality of inflation (mostly in hyperinflation periods) and do not support either the menu costs or the signal extraction approaches. We also detect significant structural changes in the relationship depending on the inflationary regime.

Nonlinear adjustment in PPP—evidence from threshold cointegration

PPP, Asymmetric adjustment, Threshold cointegration, C22, F31, F41,