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The Comparative Growth of Goods and Services Prices

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    Abstract

    For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services.

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    Bibliographic Info

    Article provided by Bank of Canada in its journal Bank of Canada Review.

    Volume (Year): 2003-2004 (2004)
    Issue (Month): Winter ()
    Pages: 3-10

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    Handle: RePEc:bca:bcarev:v:2004:y:2004:i:winter03-04:p:3-10

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    Cited by:
    1. Feng Lu & Yuanfang Li, 2009. "China’s Factor in Recent Global Commodity Price and Shipping Freight Volatilities," Trade Working Papers 22889, East Asian Bureau of Economic Research.

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