Measuring External Shocks to the City Economy: An Index of Export Prices and Terms of Trade

Abstract

This paper details the construction of an index of export goods prices (the Export Price Index or "EPI") for a panel of 196 metropolitan areas from 1977 to 1992. The "EPI" is an indicator of external demand shocks to the city economy which does not suffer from the causal ambiguity of the endogenous indicators such as income, employment or output. The creation of an index of aggregate export prices, the "EPI", for the panel of areas provides both academicians and policy analysts with a new exogenous indicator that identifies demand price innovations and the terms of trade shocks to cities. Copyright American Real Estate and Urban Economics Association.