Consumer Behavior and Changes in the Prices of Monetary Aggregates¹

Article type: Research Article

Authors: Johnson, John D.^a | Slottje, Daniel J.^b

Affiliations: [a] Department of Management & Marketing, University of Mississippi, University, MS 38677, USA | [b] Department of Economics, Southern Methodist University, Dallas, TX 75275, USA

Note: [1] We thank Bill Barnett, Camilo Dagum, Scott Hakala, Paul Spindt and Arnold Zellner for comments, the usual caveat applies.

Abstract: Today, COLA's are routinely used in labor contracts, social security and pension adjustments and in many other bilateral agreements where uncertainty about the future is part of the negotiating process. Neo-classical economic theory attempted to deal with this concept through the development of the true cost-of-living index (TCLI). This will be discussed in greater detail below. This article examines the sensitivity of the cost-of-living to some aspects of price changes (and consequently real income changes) that have not been analyzed before. Specifically, we examine the impact of changes in the prices of commodities and monetary aggregates on consumer preferences.

DOI: 10.3233/JEM-1993-19101

Journal: Journal of Economic and Social Measurement, vol. 19, no. 1, pp. 1-19, 1993