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A Note on Non‐Stationary Prices
Author(s) -
Lager Christian
Publication year - 2001
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00121
Subject(s) - numéraire , economics , profitability index , rate of profit , profit (economics) , econometrics , profit rate , microeconomics , mathematical economics , finance
The concepts of ‘real'’ and ‘nominal’ values or ‘real’ and ‘nominal’ rates of profit in the presence of non‐stationary prices are discussed. It is shown that the rate of profit depends on the choice of the numeraire if—and only if—relative prices change over time. In this case there are as many real rates as there are products, factors or bundles of products and factors. Although the rate of profit may vary with the choice of the numeraire, the ranking of processes according to profitability—and hence the choice of technique—is not affected.