Goldstein, M., and L. Officer, 1979, “New Measures of Prices and Productivity for Traded and Nontraded Goods,” Review of Income and Wealth, Vol. 25, No. 4.
International Monetary Fund, 2003, “Tourism in the Eastern Caribbean: Meeting the Competitive Threat,” in Eastern Caribbean Currency Union: Selected Issues, Prepared by Anthony Boote and others, International Monetary Fund, Washington, D.C.
Prepared by Paul Cashin, Patrick Njoroge, and Pedro Rodriguez.
The ratio of nontradable to tradable prices is used more frequently when the purpose is to analyze the allocation of resources between the tradable and nontradable sectors; the ratio of domestic to foreign prices is mostly used when the purpose is to assess the competitiveness of one country vis-à-vis another country.
Disaggregated CPI data were obtained from the ECCB for each of the six Fund members of the ECCU, at quarterly frequency for the period 1990:01–2003:02 (data for Antigua and Barbuda were only available for the period 1994:01–2001:04 while data for Dominica start at 1994:01). The typical disaggregation contains the following subgroups, some of which were classified as tradables (food and beverages, clothing and footwear, and furniture and household appliances) and some as nontradables (housing, medical care and health, transportation, education, entertainment and recreation). In 2001, most countries modified the subgroups of the CPI (in most cases to increase the level of disaggregation of some subgroups). The analysis is based on the pre-2001 subgroups and, where necessary, the new subgroups were collapsed into the old ones using their corresponding weights, in order to guarantee homogeneous components throughout the period.
The margins of the distribution sector, and with them the final price of the goods, will vary in the same direction as the price of nontradable goods, given that the distribution sector is a nontradable service. As a consequence, the final price of tradable and nontradable goods may behave very similarly when the distribution costs of the tradable goods are large.
The current and constant price measures of sectoral GDP were obtained from the ECCB for each of the eight members of the ECCU, at annual frequency, for the period 1990–2002.
While the consumer price index focuses on domestic consumption (it includes import prices but excludes export prices), the GDP deflator focuses on domestic production (it includes export prices but excludes import prices).
For this measure, the ECCU average includes Anguilla and Montserrat. The exclusion of these two countries, however, would not change the results much, given their small size relative to the other ECCU countries.
Data on the real effective exchange rate of the six Fund members of the ECCU were taken from the Fund’s Information Notice System (INS) database, at monthly frequency, for the period January 1990 to September 2003. The INS’ monthly data are calculated by interpolating the quarterly CPI data supplied by the ECCB (and monthly nominal exchange rate data). Data for Antigua and Barbuda for 2002 and 2003 are estimates (provided by the database), as the ECCB has not reported CPI data for that country beyond December of 2001.