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¿What is devaluation?
Devaluation is the decrease in the value of the national currency with respect to certain foreign currencies. Exchange rates express the relation in value between the currencies of different countries, so that devaluation manifests itself as an increase in the exchange rate. That is, more units of national currency are required to buy one unit of foreign currency.
Certain economists use the term devaluation to refer to the increase in the exchange rate under a system of fixed exchange rates, and reserve the term depreciation to refer to the increase of the value of the foreign currency with respect to the national currency under a system of flexible exchange rates.
In international economics, it is the reduction in the parity value of a certain currency
¿What is public expenditure?
Public expenditure is spending by the public sector during a given period of time. It includes fiscal spending, plus all the spending by fiscal and semifiscal firms with autonomous administration from central government. Public spending is used in goods for public consumption or capital goods, public investment.
¿What are consumer prices?
Consumer prices are the amounts of currency units recognized in the last link of the chain of intermediaries that is followed in the process of marketing a certain product. Besides production costs, this price includes storage and distribution costs, for example, transportion costs, sales commissions, intermediary margins, etc.
¿What is the consumer price index (CPI)?
This indicator reflects the variations that as a whole affect the prices of goods that are normally bought by the country’s consumers. In Colombia its calculation is the responsability of DANE, which every month publishes the indicator’s results for the month immediately before.
The index is a number that summerizes the variations in the prices of a basket of goods, which is supposed to be representative of the consumption of an average family. The index is a weighted average of the prices of all the goods that make up the basket.
Weighted average of the prices of goods and services consumed by families in urban areas.
CPI is the main instrument for the quantification of inflation because it measures changes in the prices of a representative set of goods and services consumed by the majority of the population. Naturally, as any statistical tool, it requires periodical revisions with the purpose of mantaining its reliability in the presence of a dynamical reality. Since 1989, a new metodology was introduced in Colombia refered to as IPC-60 based on data from December 1988.
¿What are producer’s prices?
Production prices are the agreed quantity of currency units to be paid in order to obtain certain goods and services provided directly by the producer. This occurs in the first stage of marketing. It is a price that directly covers the remunarations recognized to the owners of the production factors used in the manufacturing of the product: labor wages, interests on the use of capital, rent on the use of land. Therefore, the producer price is the price which, in the agricultural sector, is recognized to the grower or, in the industrial sector, is known as factory price.
¿What is the Producer Price Index (PPI)?
This index measures the changes in the prices during the first stage of marketing of a represenative basket of goods of the total internal supply of the economy. In this way, the object price to be taken into account is that of the factory, if it is a good produced internally, or that of the first time it is sold in the country if it is an imported good. This index is calculated by the Banco de la República.
The Producer’s Price index is calculated since 1990 (base month for the indicator), and substitutes the "Wholesale Price Index", which had been calculated since 1970. It can be decomposed according to three clasifications: by economic activity, by economic use or destination, and by their origin.
In the same way as the index of consumer prices, the PPI is used as an indicator of infaltion and deflation, specially when the analysis of these phenomena tries to determine the possible preasures on internal prices derived from the umbalances faced by the sector that does business abroad. The reason is that in this kind of trade operations between nations, the calculation of the producer’s or wholesale prices is relevant becuase it is at this level that most buying and selling takes place.
Besides being an indicator of wholesale prices, the PPI is used as a deflactor of the real exchange rate and is part of the deflcator for GDP.
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