tag:blogger.com,1999:blog-5908830827135060852.post3754801391928877939..comments2024-03-29T02:54:56.523-04:00Comments on Bond Economics: VAT Hikes And Inflation: U.K. EditionBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5908830827135060852.post-37963825221963755612021-12-22T08:59:20.823-05:002021-12-22T08:59:20.823-05:00This comment has been removed by a blog administrator.jazbahttps://www.blogger.com/profile/06041449345660372905noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-90871428938346806412017-04-08T12:45:18.033-04:002017-04-08T12:45:18.033-04:00This comment has been removed by a blog administrator.Bloggerhttps://www.blogger.com/profile/07287821785570247118noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-66390650428778327862014-05-08T11:10:06.869-04:002014-05-08T11:10:06.869-04:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-10343390925164955622014-03-08T12:49:40.035-05:002014-03-08T12:49:40.035-05:00I'm just basing it on the way I've modeled...I'm just basing it on the way I've modeled price setting in my model and the associated regression results I get. My econometrics is not that great though.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-30923491456050169752014-03-08T12:42:31.006-05:002014-03-08T12:42:31.006-05:00I have just got my hands again on some UK data, an...I have just got my hands again on some UK data, and I do not have a wide enough data set to build some good models. Even so, it is difficult to estimate the effect if the lags are long, as there are so many other mving pieces, Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-51745893721018422862014-03-08T11:21:43.479-05:002014-03-08T11:21:43.479-05:00Brian,
I feel the need to add a few more comments...Brian,<br /><br />I feel the need to add a few more comments here on the exchange rate issue.<br /><br />The price impact of an exchange rate movement is not straightforward. For a start, suppliers of imports of finished goods will often react by shaving their prices, so the domestic price will not move by the same amount. On the other hand, it is not just import prices that change, because domestic producers that compete with importers may raise their prices. This particularly the case with commodity products. So we see big rises in the cost of food and energy, even where these are produced domestically.<br /><br />I believe however that the response is a relatively slow one, so even though the immediate impact of a depreciation may be only a small increase in the inflation rate, I would expect inflation to then be persistently higher for several years, eroding much of the real exchange rate movement.<br /><br />The main reason this has not happened in the UK is that wage growth has been so weak, which has been a result of the severe underemployment. The result has been steeply declining real wages since 2008. Had we had a normal employment market over this period, this is extremely unlikely to have happened, but the consequence is that higher inflation would have had to erode the real exchange rate movement much faster.<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.com