12/21/20

On the potential non-equivalent exchange between developed countries

 I am in the middle of modeling the relationship between the labor force, unemployment, and price inflation.  Twelve years ago we reported several statistical models revealing a linear lagged relationship between these three parameters in developed (e.g., USA, UK, Japan, Germany, France, Austria) countries. It is time to revisit them and validate these models with new data published since 2010. There are several problems we have to overcome before the published data can be used in statistical estimates. The most important problem is the change in definitions of all three parameters. For example, for the USA we found that the CPI (consumer price index) and dGDP (GDP price deflator) change their relative behavior due to changes in definitions (e.g., imputed rent). Moreover, these changes are well described by a linear relationship.

On the way to the final statistical analysis of the model, I formulated an interesting idea, the first time in some implicit form in the post “Growth rate of the GDP per capita revisited. 4. Developed countries – cntd”. The statement was more qualitative, but I assumed that Germany is the principal beneficiary of the EU. It is difficult to prove a non-equivalent exchange. The annual increment in real GDP per capita is higher in Germany than in France, Italy, Spain, and the UK. This is a good argument. 

There is another possible indicator related to dGDP and CPI, however. The former is defined only by the prices of domestic goods and the latter includes prices of imported goods and services. I do not understand how the mechanism of the non-equivalent exchange works but the only big country in the EU has the CPI curve higher than the dGDP - Germany. The same configuration is observed in the USA and Japan. In France, Italy, the UK, Canada, and Australia, the dGDP curve is above the CPI one.  



 












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