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Tradable and non-tradable prices in the UK and EC: measurement and explanation

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  • C L Melliss

Abstract

A market divergence in inflation rates between the tradables and non-tradables sectors has been a feature of some EC economies, especially those of Italy, Spain and the UK, since the early 1980s. Sectoral productivity differences, international competitive pressures - perhaps linked to ERM membership, and government demand for non tradables are possible reasons. Empirical estimates of sectoral price equations are presented for the UK, using especially constructed RPI- based series. Competing import prices, unit labour costs, and input prices are found to be the main determinants of tradable prices. For non-tradables government demand is important. Tests show that tradable prices Granger-cause non-tradable prices in France, Germany and Italy as well as the UK.

Suggested Citation

  • C L Melliss, 1993. "Tradable and non-tradable prices in the UK and EC: measurement and explanation," Bank of England working papers 15, Bank of England.
    • Handle: RePEc:boe:boeewp:15
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1993/wp15.pdf
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    References listed on IDEAS

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    1. Falvey, Rodney E & Gemmell, Norman, 1991. "Explaining Service-Price Differences in International Comparisons," American Economic Review, American Economic Association, vol. 81(5), pages 1295-1309, December.
    2. Alogoskoufis, George S, 1992. "Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence," Economic Journal, Royal Economic Society, vol. 102(412), pages 461-480, May.
    3. Martin, Christopher, 1993. "Price adjustment and market structure," Economics Letters, Elsevier, vol. 41(2), pages 139-143.
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    Cited by:

    1. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.

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