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The Prices of Material and Intermediate Inputs in UK Manufacturing

Author

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  • Battisti, Giuliana

    (Aston Business School)

  • Paul Stoneman

Abstract

In this paper we explore the patterns and determinants of the prices or raw material and intermediate inputs in to UK manufacturing using the net (n) and gross (g) price indexes of materials and fuels (PIMF) as indicators. It is shown that (i) the PIMF series exhibit considerable fluctuations and nominal growth over time but real reductions (ii) PIMFn is stationary around a step mean, while PIMFg is stationary around a step mean and an underlying step trend with both series showing similar structural breaks (iii) the PIMF series are independent of the demand for inputs and thus cost determined. A model of the cost of MII is developed that endogenises the prices of such inputs produced within the UK between 1979 and 2000. The main drivers of PIMFn and PIMFg are shown to be a stochastic trend, the prices of imported semi manufactured inputs, oil prices (including duties) and commodity prices, the latter three also reflecting exchange rate changes. In addition it is shown that the PIMFg is affected by lagged output prices.

Suggested Citation

  • Battisti, Giuliana & Paul Stoneman, 2003. "The Prices of Material and Intermediate Inputs in UK Manufacturing," Royal Economic Society Annual Conference 2003 17, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:17
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    Keywords

    price index of materials and fuels; manufacturing;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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