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Reconsidering The Price–Income Relationship Across Countries

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  • Eiji Fujii

Abstract

This study reconsiders the well-known cross-country positive association between prices and income by focusing on heterogeneity between the inter-developed-country and inter-developing-country relationships. Empirical results reveal not only that developed and developing countries differ in magnitude of the income effect on prices, but also that they exhibit the positive price-income association for different reasons. Specifically, we find only for the inter-developed-country case that the positive price-income association is attributable, at least partly, to the Balassa-Samuelson productivity differential effect. The idiosyncrasy of the inter-developing-country relationship is not dissolved by controlling for the effects of a variety of real and financial variables.
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  • Eiji Fujii, 2015. "Reconsidering The Price–Income Relationship Across Countries," Pacific Economic Review, Wiley Blackwell, vol. 20(5), pages 733-760, December.
    • Handle: RePEc:bla:pacecr:v:20:y:2015:i:5:p:733-760
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    File URL: http://hdl.handle.net/10.1111/1468-0106.12136
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    2. Cécile Couharde & Carl Grekou & Valérie Mignon, 2020. "MULTIPRIL, a new database on multilateral price levels and currency misalignments," Working Papers 2020-12, CEPII research center.
    3. Rui Mano & Carolina Osorio Buitron & Luca A Ricci & Mauricio Vargas, 2019. "The Level REER model in the External Balance Assessment (EBA) Methodology," IMF Working Papers 2019/192, International Monetary Fund.

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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