William Alterman’s research while affiliated with U.S. Bureau of Labor Statistics and other places

The PPI only tracks Chair A for the entire period, and Chairs B and C for the months that they are domestically produced. The Import Price Index (MPI) only tracks chair D for the entire period, and chairs B and C only for the months they are imported. Thus both the PPI and the MPI for chairs would both reflect no change during the entire reference period.

Currently over one-third of U.S. trade in goods takes place between related parties. The valuation of these goods has been subject to much controversy and criticism over the years, as companies have been accused of over or under valuing these goods in order to minimize business taxes and/or import duties. A myriad of rules and regulations developed (in the case of the United States) by both the Internal Revenue Service as well as the Customs Service deal with these valuations. For the purpose of calculating the

The main purpose of this paper is to suggest a theoretical foundation for determining what is the appropriate price that a statistical agency, such as the U.S. Bureau of Labor Statistics, should seek from domestic establishments that engage in international transactions with affiliated establishments abroad. The price of transactions between related parties, called a transfer price, is an internal price. In a world where there are taxes on international transactions or where the rates of business income taxation differ across countries, a multinational enterprise (MNE) has financial incentives to choose strategically a transfer price that maximizes global after-tax profits. This strategically chosen transfer price will generally differ from an economic transfer price (based on opportunity costs) that would be suitable for a statistical agency to use in an import or export price index. How, then, should the statistical agency determine the appropriate transfer price for collection? Should the agency use the transfer price that the related party reports to the national customs authority? Or should it be the transfer price that the MNE reports for corporate income tax purposes? If the conceptually perfect transfer price cannot be collected for practical reasons, what are the practical alternatives for the price collector and can they be ordered in terms of their desirability? These are the questions addressed in this paper. We look at "practical" approximations to the theoretical transfer price in the context of a single commodity traded internationally between related establishments. We then develop practical alternatives that a statistical agency could use for collecting transfer prices and order them in terms of their desirability. Our recommended strategy for the collection of transfer prices is somewhat radical, given that we recommend that the MNE's listed transfer price only be used as a last resort. Even in this situation, both time and financial constraints may change the ranking of the acceptable methods or make the MNE's stated transfer price the only practical alternative.

The paper argues that time series methods for the seasonal adjustment of economic price or quantity series cannot in general lead to measures of short term month to month measures of price or quantity change that are free of seasonal influences. This impossibility result can be seen most clearly if each seasonal commodity in an aggregate is present for only one season of each year. However, time series methods of seasonal adjustment can lead to measures of the underlying trend in an economic series and to forecasts of the underlying trend. In this context, it is important to have a well defined definition of the trend and the paper suggests that index number techniques based on the rolling or moving year concept can provide a good target measure of the trend. The almost forgotten work of Oskar Anderson (1927) on the difficulties involved in using time series methods to identify the trend and seasonal component in a series is reviewed.

For the past decade there has been a continuing concern over the ongoing massive U.S. trade deficit, as well as related questions regarding America's ability to "compete" internationally and the consequent impact on American jobs and wages. Economists and politicians alike have debated the origination, magnitude and proper resolution of this problem. Indeed this was a frequently argued topic in the 1992 Presidential election. More recently these issues have been raised as part of the controversy over the North American Free Trade Agreement. Economists, in particular, have contributed to the debate by attempting to identify and quantify the factors which first caused the U.S. trade deficit to increase sharply and then allowed it to persist throughout the 1980s (see Table A.) Prior to the 1980s, the Keynesian macro trade models underlying these U.S. trade analyses (which are primarily based on consumer demand theory) relied almost entirely on the influence of price and demand effects to explain trade flows, and they generally performed fairly well (i.e. the volume of a country's imports was related to two factors: the overall level of demand for goods in the economy, and the relative price of imports compared to the price of similar domestic goods). Using these models as a guide, the growth of the trade deficit in the early 1980s was assumed to be related to the sharp appreciation of the dollar during this period, which made imported goods comparatively cheaper than equivalent domestic goods and U.S. exports more expensive than foreign goods. The corollary to this assumption was that if the dollar were to depreciate, the trade deficit would come down with it since the price of imports should climb. Unfortunately, while the dollar fell dramatically from 1985 through 1987, the trade deficit actually grew worse. Furthermore as Hickok and Hung (1992) point out, although in 1989 the level of relative prices and relative demand between the U.S. and the world were at roughly the