Currencies, Commodities and Consumption
Currency values, prices, consumption and incomes are at the heart of the economic performance of all countries. In order to make a meaningful comparison between one economy and another, economists routinely make use of purchasing power parity (PPP) exchange rates, but while PPP rates are widely used and well understood, they take a lot of effort to produce and suffer from publication delays. Currencies, Commodities and Consumption analyses the strengths and weaknesses of two alternatives to PPP. Firstly, the so-called Big Mac Index, which uses hamburger prices as a standard of measurement, and second, a less well known technique which infers incomes across countries based on the proportion of consumption devoted to food. Kenneth W. Clements uses international macroeconomics, microeconomic theory and econometrics to provide researchers and policy makers with insights into alternatives to PPP rates and make sense of the ongoing instability of exchange rates and commodity prices.
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132 countries adjustment alcohol analysis approximately Australia Australian dollar average beverages Big Mac Index British pound Canadian dollar cent Clements coefﬁcient column commodity currency commodity prices commodity-currency commodity-price common factor consumption cont cost currency commodities decrease deﬁned differences domestic dummies Economics equation estimates euro exports Figure ﬁrst ﬂexibility food budget share food share horizon h impact income elasticity inﬂation International Comparison Program Kurtosis log changes log ratio Mac prices marijuana prices matrix mean mispricing nominal exchange rate nominal rate nontraded ofthe overlapping observations overvalued panel parameter poor countries poor group price and volume price dispersion price index Purchasing Power Parity rates and prices ratio real exchange rate reﬂect relative price rich countries rich group RMSE signiﬁcant spillovers standard errors Statistics Table terms of trade twenty-four countries undervalued variable variance volatility Western Australia whereas world price Zealand Zealand dollar zero