Technology acceleration: model and evidence
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This paper investigates the occurrence of 'technology acceleration' across a range of information technologies. The prospect of was broached by Gordon Moore of Intel in 1965. His anecdotal 'law' – i.e. performance / price doubles every 18 months – has become received wisdom in many industries. Gilder popularized it as Moore’s law and proposed Gilder’s law and a number of such 'laws' reflect underlying social and networking phenomena in research and development. These ‘laws’ appear to hold for long periods of time, and specific markets may be characterized by their specific technology acceleration coefficients. Technology acceleration is related to the broader economic study of what are called hedonic pricing methods, which themselves are approaches to identifying shadow values. The hedonic pricing literature attempts to infer demand for product characteristics (such as performance) from market prices. This research review the hedonic pricing literature for computers, extends the existing literature for a broad range of computers and information technologies, and proposes technology-specific dynamic measures of price-performance change that is robust.Keywords:
Dynamic Pricing
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This paper explores the imputed service price approach to the pricing of the services of consumer‐owned‐and‐used durables in the construction of the consumer price index, using the services of owner‐occupied housing as an illustration. A theoretical framework for analyzing this question is first developed. Certain practical problems are then discussed. The conceptual difficulty of constructing an appropriate rate of return on the basis of available data on interest rates and house prices, in the context of inflation, is explored. Two arguments are advanced that statistical agencies ought not to follow the imputed service price approach in pricing the services of owner‐occupied dwellings and other consumer durables. On the one hand, nominal interest rates will, in any short period, reflect monetary policy and not any change in the money “rental” of owner‐occupied houses. Second, movements in nominal interest rates will also reflect changes in the money price of pure consumption goods, as well as changes in the money price of houses. The argument is extended to other consumer durables and, in the limiting case, to monetary balances, and it is concluded that in all but trivial cases the application of the service price approach leads to price movements of little or no meaning.
Consumption
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The fundamentals characterizing agricultural commodity prices have often been debated in research and policy circles. Building on limitations in the existing literature, the present study conducts an integrated test and empirically analyses the international price of palm and soybean oil from 1960(1) to 2016(8). For this purpose the univariate Structural Time Series Model based on the state space framework is applied. This approach allows flexibility to model complex stochastic movements, seasonality, cyclical patterns and incorporate intervention analysis. Estimation is based on the Maximum Likelihood method via the Kalman Filter. The results establish that both series exhibit a stochastic long term trend punctuated by multiple breaks. The findings also uncover the presence of cyclicality which results in price swings of varying duration and amplitude. The model works well as a description of oilseed prices and improves awareness of their separate structural components. These are fundamental to design country and commodity specific policy strategies and respond to volatile market conditions. The results underscore that contrary to previous price spikes most of the drivers of the mid 2000s price spikes are structural and on the demand side. These new drivers in oilseed markets suggest the possibility of fundamental change in price behaviour with longer-lasting effects.
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Although the market for Canadian paintings is now of substantial magnitude, with several works having recently sold for well over a million dollars, it remains true that with very few exceptions, the works of Canadian painters are bought and sold only in Canada and held only by Canadian collectors. This market can thus be viewed as almost exclusively local, and it is therefore not clear that there should be any linkage between price movements for Canadian art and those for the mainstream international market in old master, impressionist, and modern art. This paper investigates the presence and nature of such time series dependence econometrically, both in terms of long term trends as reflected in the co-integrating relationship between Canadian and the international market, and in terms of short-run co-movements as represented in correlations. The possibility that the local market follows the international one is also considered through an analysis of Granger-Causality. For Canadian art prices we use a new hedonic index that has been computed using an updated version of the data set of Hodgson and Vorkink (2004), while for the international prices, we use an index provided by Mei and Moses.
Art Market
Mainstream
Linkage (software)
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We use the methodology applied at the aggregate level by Gali and Gertler (1999) to analyze price and cost data for U.S. six‐digit North American Industry Classification System (NAICS) industries. Industries with price adjustment periods of at least 6 quarters generate no more than about 43% of total sales of industries we analyze. Industries with estimated price adjustment speeds of less than a year generate at least 44% of sales. Our conclusion is that disaggregate U.S. data provide as much support in favor of relatively high price flexibility as they do for the assumption of widespread price stickiness utilized in many modern macroeconomic theories. ( JEL E31, L16)
Macro
Price setting
Aggregate data
Factor price
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This special issue of the European Journal of Comparative Economics gathers three research papers from highly-qualified researchers from the field of energy economics, which have been presented at the 4th International Research Meeting in Business and Management (5 July 2014, Nice, France). papers provide careful empirical analysis making use of recent econometric techniques drawn from financial econometrics for most of them. In these papers, the issue of how energy prices are determined is the central question and the authors find alternative explanatory variables such as renewable energy prices (and volumes), exchange rates or stock indices. findings have important implications for various economic agents, to the extent that both the macroeconomic and financial environments have become more uncertain and that governments of most countries around the world have invited specialists to think about sustainable development and financing. In their study Wind power feed-in impact on electricity prices in Germany 2009-2013, Francois Benhmad and Jacques Percebois develop a motivating empirical analysis of the impact of renewable energy sources on the spot price level and volatility for Germany, thus extending the analysis of electricity price dynamics initiated in Knittel and Roberts (2005). Their results point to a significant and negative effect of wind-generated electricity on spot electricity price while volatility is increased at the same time. This is an important finding as renewable energies have often been criticized on the ground of their potential price-increasing effect while only very limited research has been produced to support this assumption. An additional result of their study is that the European electricity grids interconnection plays its expected role in lowering price change while keeping volatility at a reasonable level. Overall, the authors conclude to a significant impact of interconnection on the expected effects of wind-generated electricity. next two papers deal with the relationship of oil prices with financial variables. article The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach by Vincent Bremond, Emmanuel hache and Tovonony Razafindrabe, investigate the link between the effective exchange rate of the dollar and the oil price over the 1976-2013 period in line with recent studies by Amano and van Norden (1988a,b; Aloui et al., 2013). In a state-of-the-art Bayesian time-varying parameter vector auto-regressive framework, the authors demonstrate the strong role of the dollar in shaping the oil price dynamics, an effect that is not widely accepted among energy experts who often consider oil as a pure exogenous variable. As a corollary to their genuine findings, the authors also provide evidence that the recent financialization of commodity markets coincides with a change in the relationship between oil and non-oil commodity prices as noted in Fattouh et al. (2013). third paper by Ilyes Abid, Khaled Guesmi, Gazi Salah Uddin and Zied Fiti, On the Time-Varying Relationship between Oil Prices and G7 Equity Indices: a Multivariate Approach analyzes the link between oil price and stock markets in the case of G7 countries, thereby extending the line of research initiated a couple of decades ago by Huang et al. …
Energy economics
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Market Integration
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Prior to the 1960s most American economists rejected hedonic techniques as a solution to the problem of quality change in price indexes. I argue that behind that judgment lay a deeper conceptual divide over how best to define and assess product quality: through expert testing or through market price differentials. Most American economists working on price indexes at the time had ties to the U.S. consumer movement, which emphasized consumer ignorance and promoted expert analysis as the only reliable guide to product quality. During the postwar era, these ties began to dissolve, and as younger economists more readily accepted the market as an arbiter of quality, they likewise saw the econometric analysis of prices and product characteristics as a logical and unproblematic tool for handling quality change in price indexes.
Hedonic index
Ignorance
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Economic theorists for years have considered the possibility that the direction of technical change is altered by changes in relative prices. Prices have also been identified as one of the determinants of technical change through innovation. This paper extends the theory of the firm to cover situations in which the firm's technology set is conditional on expected prices. The basic idea is to distinguish between market prices, or the prices that guide the firm's choices subject to the technology that is in place, and normal prices, the prices conditioning the choice of technology. A generalized price effect is obtained that includes the traditional price effect as well as the technical change effect of price changes and an example is presented.
Relative price
Technical change
Price setting
Factor price
Induced innovation
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Austrian house prices have risen rapidly in recent years and there has been considerable debate on the underlying factors. Much of the debate focuses on increasing trends in real house price indexes and the ratio of house prices to disposable income as a measure of affordability. While it is generally accepted that the low interest rate environment is a key driver of house prices, there is uncertainty as of the sustainability of the level of house prices in some European countries. The OeNB fundamental indicator for residential property prices, launched in January 2014, points to an overvaluation in property prices by 21.7% in Vienna in the first quarter of 2018. For Austria as a whole, the indicator reached 11.2%. Several international studies also point to overvaluation in Austrian housing markets. House prices can fluctuate more than fundamentally justified because agents overreact to current fundamentals as well as past returns and are influenced by their sentiment. Reliable valuation metrics are therefore very important for monitoring residential property markets. While different approaches to identify overvaluation have strengths and weaknesses, theoretical consistency should be a prerequisite of any model of house price behaviour. Furthermore, examining national price indices is an ineffective means of early detection of housing bubbles. Speculative overvaluations arise in individual local and regional markets before spreading to the national market. This paper analyses regional house price developments in Austria. We follow Bourassa et al. (2016) and use an asset pricing approach to compare actual price levels with implied fundamental or equilibrium levels. We model prices for existing condominiums as a function of the present value of expected market rents, allowing for a time-varying risk premium and state dependent rental growth expectations. Model results are then compared with results produced by alternative methods to assess house price developments. We also discuss the theoretical weaknesses of the OeNB fundamental indicator and the critical assumptions underlying our model.
House price
Residential Property
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Price divergence is readily apparent to anyone who shops. Travelers from Manchester to London, or from Chicago to Paris, are hit by sticker shock. Products ranging from London Fog raincoats to Viagra are available over the Internet at half their retail store prices. Common experience tells us that prices for identical products differ between countries, between cities, even between neighboring shops. On the other hand, common experience also tells us that open markets and greater competition will force a degree of price convergence, if not identical prices.This monograph presents speculative calculations that illustrate potential benefits from price convergence between countries. The authors take a fresh look at global economic integration by examining existing price divergence, and possible price convergence, across a range of consumer goods and then calculate the potential benefits of price convergence on a country-by-country basis and for the world as a whole. This study examines the potential benefits from price convergence resulting from more competition and market integration, not perfect competition and market integration. The authors calculate these benefits assuming that the world economy can attain the same degree of competition and market integration--and hence price convergence--as exists within the United States.
Divergence (linguistics)
Market Integration
Price dispersion
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