IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v39y2007i7p859-882.html
   My bibliography  Save this article

The prices of material and intermediate inputs in UK manufacturing: identifying the contributions of world prices and domestic factor costs

Author

Listed:
  • Giuliana Battisti
  • P. Stoneman

Abstract

In this article, we explore the patterns and determinants of the prices of raw material and intermediate inputs (MIIs) to UK manufacturing as measured by the net (n) and gross (g) producer price indexes of materials and fuels (PIMF). Despite the importance of MII in total manufacturing costs their prices have been little studied. It is shown that these prices are Granger independent of the demand for such inputs and thus a simple cost based model of price determination is constructed. This model forecasts that MII prices are functions of world prices for oil, commodities and semi-manufactured products intermediated by exchange rates and duties, domestic factor prices and a trend reflecting domestic technical change, changes in mark ups and change in weights. By the means of an error correction representation it is found that PIMFn and PIMFg, in the long and short-run, are more sensitive to overseas-determined prices (of oil, commodities and semi-manufactured products) than domestically determined prices (labour, capital and the trend). It may be argued that to some considerable degree therefore the prices of material and intermediate inputs in UK manufacturing will not be particularly sensitive to policy actions.

Suggested Citation

  • Giuliana Battisti & P. Stoneman, 2007. "The prices of material and intermediate inputs in UK manufacturing: identifying the contributions of world prices and domestic factor costs," Applied Economics, Taylor & Francis Journals, vol. 39(7), pages 859-882.
  • Handle: RePEc:taf:applec:v:39:y:2007:i:7:p:859-882
    DOI: 10.1080/00036840500461832
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500461832
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00036840500461832?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Erik Britton & Jens D J Larsen & Ian Small, 2000. "Imperfect competition and the dynamics of mark-ups," Bank of England working papers 110, Bank of England.
    2. Ian Small, 1997. "The cyclicality of Mark-ups and Profit Margins: Some Evidence for Manufacturing and Services," Bank of England working papers 72, Bank of England.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kasparian, Jérôme, 2009. "Contribution of crude oil price to households' budget: The weight of indirect energy use," Energy Policy, Elsevier, vol. 37(1), pages 111-114, January.
    2. Fangtao Liu & Yong Ding & Jia Gao & Pu Gong, 2017. "Effects of Cost Factors on National Manufacturing Based on Global Perspectives," Economies, MDPI, vol. 5(4), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Batini, Nicoletta & Harrison, Richard & Millard, Stephen P., 2003. "Monetary policy rules for an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11-12), pages 2059-2094, September.
    2. Hashmat Khan & Richhild Moessner, 2005. "Competitiveness, inflation, and monetary policy," Bank of England working papers 246, Bank of England.
    3. Ángel Estrada & David López-Salido, 2005. "Sectoral mark-up dynamics in Spain," Working Papers 0503, Banco de España.
    4. Knudsen, Eirik Sjåholm, 2019. "Bad weather ahead: Pre-recession characteristics and the severity of recession impact," Journal of Business Research, Elsevier, vol. 104(C), pages 118-130.
    5. Davis, Colin & Hashimoto, Ken-ichi & Tabata, Ken, 2022. "Demographic structure, knowledge diffusion, and endogenous productivity growth," Journal of Macroeconomics, Elsevier, vol. 71(C).
    6. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Money Affairs, CEMLA, vol. 0(1), pages 1-30, January-J.
    7. Argia M. Sbordone & Timothy Cogley, 2004. "A Search for a Structural Phillips Curve," Computing in Economics and Finance 2004 291, Society for Computational Economics.
    8. Holger Görg & Frédéric Warzynski, 2006. "The Dynamics of Price Cost Margins: Evidence from UK Manufacturing," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 303-318.
    9. Riccardo DiCecio & Edward Nelson, 2007. "An estimated DSGE model for the United Kingdom," Review, Federal Reserve Bank of St. Louis, vol. 89(Jul), pages 215-232.
    10. Zanetti, Francesco, 2011. "Labor market institutions and aggregate fluctuations in a search and matching model," European Economic Review, Elsevier, vol. 55(5), pages 644-658, June.
    11. Ali Culha & Cihan Yalcin, 2005. "The Determinants of the Price-Cost Margins of the Manufacturing Firms in Turkey," Working Papers 0515, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    12. Dawid Herbert & Gemkow Simon & Harting Philipp & Kabus Kordian & Wersching Klaus & Neugart Michael, 2008. "Skills, Innovation, and Growth: An Agent-Based Policy Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(2-3), pages 251-275, April.
    13. Faccini, Renato & Millard, Stephen & Zanetti, Francesco, 2011. "Wage rigidities in an estimated DSGE model of the UK labour market," Bank of England working papers 408, Bank of England.
    14. Rebecca Driver & Stephen Millard, 2004. "Exchange rates, commodities and the implications of volatility in a small open economy world," Money Macro and Finance (MMF) Research Group Conference 2003 26, Money Macro and Finance Research Group.
    15. Francesco Zanetti, 2014. "Labour Market and Monetary Policy Reforms in the UK: a Structural Interpretation of the Implications," Economics Series Working Papers 702, University of Oxford, Department of Economics.
    16. Holger Görg & Frederic Warzynski, 2003. "Price Cost Margins and Exporting Behaviour: Evidence from Firm Level Data," Discussion Papers of DIW Berlin 365, DIW Berlin, German Institute for Economic Research.
    17. Coto-Martinez, Javier & Dixon, Huw, 2003. "Profits, markups and entry: fiscal policy in an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 573-597, February.
    18. Morimoto, Takaaki & Tabata, Ken, 2020. "Higher Education Subsidy Policy And R&D-Based Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2129-2168, December.
    19. Železník Martin, 2011. "Labor Market Regulation and its Characteristics: Comparison Between Czech Republic and Austria," Review of Economic Perspectives, Sciendo, vol. 11(2), pages 93-120, January.
    20. Evren Ceritoglu, 2002. "The Cyclicality Of Mark-Up Ratios : The Case Of Turkish Industry," Working Papers 0204, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:39:y:2007:i:7:p:859-882. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.