Publication

This paper measures the common component in price changes that has an equiproportional effect on all prices. Changes in this component can be interpreted as changes in the value of the numeraire since, by definition, they leave all relative prices unchanged. The authors address two questions: First, does the value of the numeraire ever change, and second, are these changes neutral? Using 187 US time-series on prices, they estimate changes in the value of the numeraire from 1960 to 2006. The authors discuss theoretical implications of their findings, which are related to the question of monetary neutrality.