Economic Letters

18 November 2022

• Residential property prices and consumer price inflation in Hong Kong (PDF) (Word)
  James P Vere
  This article examines the relationship between residential property prices and consumer price inflation in Hong Kong with quarterly data from 1984 to 2021.  In principle, as private residential property prices are asset prices, they should move in advance of private housing rents and may be correlated with other types of expenditures as well.  Results from a vector error correction model show that, in the long run, movements in private residential property prices are fully reflected in the private housing rental component of Hong Kong's Composite Consumer Price Index (CCPI).  The long-run elasticity of overall consumer prices with respect to private residential property prices is about 0.6.

26 August 2022

• Disentangling wages and consumer price inflation in Hong Kong (PDF) (Word)
  James P Vere
  This article explores the relationship between nominal wages and consumer prices in Hong Kong with quarterly data from 1984 to 2021.  As predicted by theory, consumer prices and productivity-adjusted nominal wages track each other over the long term.  In the short term, Granger causality tests and a differenced vector autoregression model show that consumer prices tend to respond more quickly to external economic shocks.  Consequently, over the past few decades, consumer prices have been a leading indicator of productivity-adjusted nominal wages.

6 June 2022

• Commodity prices and consumer price inflation in Hong Kong (PDF)
  James P Vere
  This article explores the relationship between international commodity prices and consumer prices in Hong Kong with quarterly data from 1984 to 2021.   Stationarity and cointegration tests show that the World Bank commodity price indices for agriculture, energy and metal and Hong Kong's Composite Consumer Price Index (CCPI) are nonstationary, but cointegrated, indicating that a vector error correction model is the most appropriate.  Reflecting the relatively greater importance of food in the CCPI expenditure basket, the long-run elasticity of consumer prices with respect to agriculture prices is about 0.1.

11 March 2022

• Possible economic losses caused by the local COVID-19 pandemic (PDF)
  Desmond Hou and Leo Wong
  The outbreak of COVID-19 pandemic since early 2020 dealt a significant blow to global and local economic activities. This article focuses on seven economic activities (catering, retail, hotels, passenger transport, other spending of visitors, construction, and import/export) that were harder hit, and estimates their economic losses caused by the pandemic. It is crudely estimated that the total economic loss caused by these seven selected economic activities totalled around $320 billion and $246 billion in 2020 and 2021 respectively, equivalent to 10.6% and 8.0% of GDP under the hypothetical no-pandemic scenario.