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The purpose of the present study is to measure the amount of price increase that the proposals for accommodation required in 1973-74. Presumably such an estimate of the amount could be made in time to act on it. Whether accommodation is a desirable policy is not addressed here. Consistently followed, it would result in a higher long-run rate of inflation, because there are not likely to be nearly enough episodes of deflationary accommodation to offset the inflationary ones. Notwithstanding the appeal in the short run to accept inflationary fait accompli in order to avoid prolonged economic slack, one may have strong reservations about the long-run consequences on expectations of following such a policy.

Inflation (Finance) --- Econometric models.

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The aim of this study is to contribute to the measurement and analysis of errors in economists' predictions of changes in aggregate income, output, and the price level. Small sample studies of forecasts can be instructive, but their limitations must be recognized. Compilation of consistent forecast records extending over longer periods of tine is necessary to establish a reasonably reliable base for assessments of forecasting behavior and. performance. Thus the historical record of post-World War II forecasts assembled in the 1960's by the NBER is here extended and updated.

Economic forecasting. --- Business cycles. --- Economic history.

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The main thrust of this report is the development of a price record that would provide a basis for the identification of the areas of activity in the oil industry in which significant price changes have occurred, with expectation that this type of information could serve as a useful ingredient in the policy-making process. The study presents estimates of the selling price of a barrel of oil at three stages of operations of the industry -- the wellhead, the refinery and the end-use levels. Prices of individual classes of petroleum products at refineries and at the end-use level were also estimated. The price data are provided for benchmark years 1958, 1963,1967 and 1972, as well as for 1973, 1974, 1975 and 1976 when crude oil prices rose considerably. The estimating procedure is briefly described in the study. The examination of the transmission of prices from market to market within the oil industry shows that the steep rise in 1973-74 prices paid by end-users of petroleum products was due not only to the large increases in crude oil prices but also to the sizable in-creases in gross operating margins-labor costs, transportation, profits, etc. -- at the refinery and distribution levels. In the post-embargo years of 1975 and 1976, prices continued to advance but at a slower pace. The refiners' gross margins in 1975, however, declined somewhat; they rose significantly above the 1974 level in1976. The marketers' margins made further gains in 1975, but exhibited a decrease in 1976. Another finding is that during 1973-74 there was a considerable narrowing in the price differentials among the various re-fined products; in particular the price of residual fuel oil, which averaged 20 percent of the price of gasoline in the decade of the 1960's,rose to 52 percent of the price of gasoline by 1974. The narrowing process continued in 1975-1976.The study includes a short discussion of the effects of rising oil prices in 1973-1976 on the profitability of the petroleum industry and the general price level.

Prices.

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Traditional theory implies that the relative price of consumer goods and of such real assets as land and gold should not be permanently affected by the rate of inflation. A change in the general rate of inflation should, in equilibrium, cause an equal change in the rate of inflation for each asset price The experience of the past decade has been very different from the predictions of this theory: the prices of land, gold, and other such stores of value have increased by substantially more than the general price level. The present paper presents a simple theoretical model that explains the positive relation between the rate of inflation and the relative price of such real assets. More specifically, in an economy with an income tax, an increase in the expected rate of inflation causes an immediate increase in the relative price of such 'store of value' real assets. The behavior of real asset prices discussed in this paper is thus a further example of the non-neutral response of capital markets to inflation in an economy with income taxes.

Inflation (Finance)

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Sociology of health