tag:blogger.com,1999:blog-53628013486022684732024-03-13T11:13:32.322-07:00Reflections on Monetary EconomicsNick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.comBlogger118125tag:blogger.com,1999:blog-5362801348602268473.post-82809016279439608812018-02-09T06:17:00.000-08:002018-02-09T06:17:54.197-08:00What is the Benefit to Banks from Money Creation?<!--[if gte mso 9]><xml>
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In a response to a recent <a href="http://www.bondeconomics.com/2018/02/primer-what-limits-bank-lending.html" target="_blank">post</a> by Brian Romanchuk, somebody
made the following comment:</div>
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<br /></div>
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"If private banks are ..... allowed to create and lend
out their own money, they can undercut the ..... free market rate of interest,
and for the simple reason that printing money is cheaper than having to borrow
it or earn it."</div>
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This seems to suggest a kind of model in which banks choose
whether to finance themselves with someone else's money that they have to pay to
borrow, or money they create for themselves for free.<span style="mso-spacerun: yes;"> </span>I think the problem is that this confuses two
distinct ideas: that there is a benefit from having monetary liabilities and
that bank lending increases deposits.</div>
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<br /></div>
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The potential benefit that accrues to banks by virtue of
their status as money issuers arises through a reduced rate of
interest on monetary liabilities.<span style="mso-spacerun: yes;"> </span>If a
particular type of bank deposit, such as a positive current account balance, is
readily available for making payments, then it typically carries a lower rate
of interest than other deposits.<span style="mso-spacerun: yes;"> </span></div>
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<br /></div>
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Sometimes the rate of interest on such balances is zero, but
it need not be.<span style="mso-spacerun: yes;"> </span>The important point is
that there is a benefit to the bank through a reduced funding cost.<span style="mso-spacerun: yes;"> </span>Set against this is the cost to the bank of providing
current account services in the form of the costs of premises, staff and equipment.</div>
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<br /></div>
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At this point it is worth noting that these costs and benefits
are based on the level of the bank's outstanding monetary liabilities.<span style="mso-spacerun: yes;"> </span>It is nothing to do with which bank makes the
loan that creates the deposit.<span style="mso-spacerun: yes;"> </span>It is
quite possible to have banks making lots of loans, but having minimal
liabilities in the form of immediately available deposits, because that bank relies on
different funding techniques.<span style="mso-spacerun: yes;"> </span>These
banks would be creating new money, but not getting any of the potential benefit
that arises from having monetary liabilities.</div>
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<br /></div>
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On the other hand, it would be possible to have a bank with
very large current account liabilities but which never engaged in deposit
creation.<span style="mso-spacerun: yes;"> </span>This would happen if the bank
was simply taking deposits through payments received in from other sources and
making all of its loans in cash<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>.<span style="mso-spacerun: yes;"> </span>The potential benefit of operating current
accounts would be very important to such a bank. <span style="mso-spacerun: yes;"> </span></div>
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<br /></div>
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The point here is that it makes no sense to say that it is
cheaper for a bank to print money than borrow it.<span style="mso-spacerun: yes;"> </span>What the bank does at the point of making a
loan is irrelevant.<span style="mso-spacerun: yes;"> </span>What matters is how
it chooses to manage its liabilities going forward and in particular the extent
to which it chooses to compete for current account deposits.</div>
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<br /></div>
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The extent of the benefit depends then on how competitive
that market is.<span style="mso-spacerun: yes;"> </span>Under perfect
competition, banks would have to offer interest rates on current accounts that
would simply leave them with normal profits.<span style="mso-spacerun: yes;">
</span>However, it is likely that there is a degree of monopolistic competition
in the provision of banking services, particularly at the retail level, and
this means that there is some supernormal profit that accrues to banks as
providers of monetary liabilities.</div>
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<br /></div>
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It is difficult to assess how profitable it is for banks to have
monetary liabilities, largely because many of the costs are shared with other
activities.<span style="mso-spacerun: yes;"> </span>Even for the banks
themselves, it is somewhat arbitrary how costs get allocated.<span style="mso-spacerun: yes;"> </span>However, the point here is that any such
profit is just regular monopolistic profit in the market for current account
services and not something to do with money being created out of thin air.</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>
Making loans in cash does in fact "create money" in the sense of
increasing the broad money supply, but it is not what people usually have in
mind when they talk of banks "printing money".</div>
</div>
</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com29tag:blogger.com,1999:blog-5362801348602268473.post-85710969240519491492018-01-27T04:44:00.000-08:002018-01-27T04:44:27.392-08:00Automation and Real Wages<!--[if gte mso 9]><xml>
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Economists generally work on the basis that improvements in
technology lead to higher real wages.<span style="mso-spacerun: yes;"> </span>Conventional
production functions (when combined with other assumptions) invariably produce
this result.<span style="mso-spacerun: yes;"> </span>Looking at the Cobb-Douglas
production function, as the most common example, an increase in total factor
productivity raises labour's marginal product.<span style="mso-spacerun: yes;">
</span>With the normal assumptions about competition, this leads to higher real
wages.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Although I have no problem with using such things at times, I am wary of simple aggregate
production functions.<span style="mso-spacerun: yes;"> </span>It seems clear to
me that technological developments can lead to reduced real wage levels, even
without considering how such developments might impact on monopoly power.</div>
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<br /></div>
<div class="MsoNormal">
Although I'm sure others have produced models that
illustrate this, I'm not aware of any and, in any event, I like to experiment
with things myself, so I have constructed a little model of production in which
technological innovation leads to a fall in real wages.</div>
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<br /></div>
<div class="MsoNormal">
There is a single good produced by a combination of labour
and capital.<span style="mso-spacerun: yes;"> </span>There are two possible
production techniques, each of which requires a fixed quantity of labour and a
fixed quantity of capital to produce a fixed quantity of the good.<span style="mso-spacerun: yes;"> </span>These quantities are set out in the table
below:</div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;">Output</b></div>
</td>
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<b style="mso-bidi-font-weight: normal;">Labour
Input</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
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<b style="mso-bidi-font-weight: normal;">Capital
Input</b></div>
</td>
</tr>
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<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
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<b style="mso-bidi-font-weight: normal;">Technique
A</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
12</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1</div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 2; mso-yfti-lastrow: yes;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
B</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
24</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
4</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Total labour and total capital are fixed.<span style="mso-spacerun: yes;"> </span>There is perfect competition and no demand
deficiency.<span style="mso-spacerun: yes;"> </span>This has two implications:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. The use of each techniques will normally be such that will ensure
full employment of both labour and capital.<span style="mso-spacerun: yes;">
</span>However, if the ratio of available labour to available capital is too
extreme, then all production will use a single technique (whichever maximises
use of the abundant factor) and some of that abundant factor will be
unutilised.<span style="mso-spacerun: yes;"> </span>This possibility is ignored
here - it is assumed that available labour and capital always lead to some
combination of possible techniques.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. The real wage will be at a level that ensures the return
on capital is the same for each technique.<span style="mso-spacerun: yes;">
</span>If it were not, suppliers of capital would switch technique which would
lead to shortages or surpluses in the labour market.<span style="mso-spacerun: yes;"> </span>With the numbers here, the real wage works out as 8
units of output per unit of labour.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Marginal productivity is not well defined for each
individual technique.<span style="mso-spacerun: yes;"> </span>However, given the
above conclusion about how the techniques are combined, there is a marginal
productivity of labour at an aggregate level.<span style="mso-spacerun: yes;">
</span>It is relatively easy to show that this is equal to the real wage.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If we take factor supplies of 12 units of labour and 24
units of capital, we get the following output matrix: </div>
<div class="MsoNormal">
<br /></div>
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<tbody>
<tr style="height: 25.5pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Labour
Used</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Capital
Used</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Production</b></div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 1;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
A</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
8</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
8</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
96</div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 2;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
B</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
4</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
16</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
96</div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Total</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
12</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
24</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
192</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We now want to consider the innovation of a new technique involving
a more intensive ratio of capital to labour.<span style="mso-spacerun: yes;">
</span>For this to be beneficial overall, it must yield a higher return on
capital given the prevailing real wage.<span style="mso-spacerun: yes;">
</span>The details of this new technique are:</div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 25.5pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Output</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Labour
Input</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Capital
Input</b></div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
C</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
30</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
5</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Technique C dominates technique B at all levels of the real
wage, so the latter is completely abandoned.<span style="mso-spacerun: yes;">
</span>Since the relative factor input ratios have changed, there is also a
change in the amount of resources devoted to technique A.<span style="mso-spacerun: yes;"> </span>The new levels of production are shown below:</div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 25.5pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Labour
Used</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Capital
Used</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Production</b></div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 1;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
A</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
9</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
9</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
108</div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 2;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Technique
C</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
3</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
15</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
90</div>
</td>
</tr>
<tr style="height: 25.5pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Total</b></div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
12</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
24</div>
</td>
<td style="height: 25.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
198</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The change in techniques also impacts on the real wage,
which must settle at a new level to continue to equate return on capital across
techniques.<span style="mso-spacerun: yes;"> </span>In fact this involves a fall
in the real wage to 7.5. <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The interesting thing here is that although labour
productivity (labour's average product) has increased, its marginal product has
decreased.<span style="mso-spacerun: yes;"> </span>Real wages have therefore fallen, even though output per head has risen.<span style="mso-spacerun: yes;"> </span>The corresponding change is that the return
on capital has increased.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
My belief is that, on the whole, technological progress
results in higher overall real wages.<span style="mso-spacerun: yes;">
</span>However, I do not think we can assume that all new innovations will do
this.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com8tag:blogger.com,1999:blog-5362801348602268473.post-58864245677637753322017-12-24T02:05:00.002-08:002017-12-24T02:05:41.398-08:00The Irrelevance of Private Money Creation to Loanable Funds Critiques<!--[if gte mso 9]><xml>
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A frequently repeated claim deployed in critiques of
loanable funds theory is that private bank money creation removes the constraint on
investment being limited by "prior" savings.<span style="mso-spacerun: yes;"> </span>In a generally good article on loanable funds
<a href="https://www.ineteconomics.org/perspectives/blog/what-mainstream-economists-get-wrong-about-secular-stagnation" target="_blank">here</a>, Servaas Storm spends a lot of time discussing the <i>ex nihilo</i> creation of
private money.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I think this is highly misleading.<span style="mso-spacerun: yes;"> </span>Whilst not denying that understanding bank
behaviour is important,<span style="mso-spacerun: yes;"> </span>the savings
constraint issue is simply a result of having a monetary exchange economy and
has nothing to do with where the money comes from. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
First some clarification.<span style="mso-spacerun: yes;">
</span>It is sometimes suggested that the constraint in question is that saving
must take place before investment.<span style="mso-spacerun: yes;"> </span>To
the extent this really does refer to the order of events in time, it is clearly
wrong.<span style="mso-spacerun: yes;"> </span>Saving and investment must always
take place simultaneously, by their very definition, regardless of whether we
are talking about a barter or monetary economy. <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
What does matter is the relationship between plans and
outcomes, specifically when agents have plans that are inconsistent.<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a><span style="mso-spacerun: yes;"> </span>In a normal market for some commodity, if planned
demand is different from planned supply, the amount actually traded will be the
lower of the two.<span style="mso-spacerun: yes;"> </span>Neither buyer or
seller will trade more than they want.<span style="mso-spacerun: yes;"> </span></div>
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<br /></div>
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Translated into a loanable funds market, this means that the
amount of actual saving would be the lower of planned saving and planned
investment.<span style="mso-spacerun: yes;"> </span>Savers cannot end up saving
more than they planned.<span style="mso-spacerun: yes;"> </span>And this is
indeed what we find in a barter economy, where all saving is in the form of
commodities.</div>
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<br /></div>
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The difference with a monetary economy is that actual saving
is not constrained by planned saving.<span style="mso-spacerun: yes;">
</span>This is because actual saving must be equal to actual investment and
actual investment is not constrained by planned saving.<span style="mso-spacerun: yes;"> </span></div>
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<br /></div>
<div class="MsoNormal">
The easiest way to see this is to think about bank lending
and recognise that banks can provide finance to enable new investment without
first needing to check the plans of their depositors.<span style="mso-spacerun: yes;"> </span>Although this is a useful picture, it can
lead to the mistaken view that it is private bank money creation that removes
the planned saving constraint.<span style="mso-spacerun: yes;"> </span>This is
not correct.<span style="mso-spacerun: yes;"> </span>What removes that
constraint is monetary exchange and that holds even with a fixed, exogenous
money supply.</div>
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<br /></div>
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Consider an economy where there is a fixed money supply of
$100, all held by households.<span style="mso-spacerun: yes;"> </span>Households
also hold $100 in loans to firms, so $200 in total financial assets.<span style="mso-spacerun: yes;"> </span>Firms would like to borrow more and invest
more, but households do not wish to take on more credit risk.</div>
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<br /></div>
<div class="MsoNormal">
Now assume that households become less risk averse and wish
to change their portfolio to $50 money and $150 loans.<span style="mso-spacerun: yes;"> </span>Note the important distinction here between
saving and lending.<span style="mso-spacerun: yes;"> </span>Households are
planning additional lending, but they are not planning any increase in holding
of financial assets (which we can equate to saving here, as we will assume
households do not undertake investment expenditure).<span style="mso-spacerun: yes;"> </span>Although we talk about loanable funds, we don't mean what is actually loaned but what is saved.<span style="mso-spacerun: yes;"> </span>Here, the planned saving is zero.</div>
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<br /></div>
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However, if the $50 of additional loans to firms is spend on
investment then it ends up back in the hands of households again.<span style="mso-spacerun: yes;"> </span>Household income has risen and they end up still
holding $100 of money, even though they planned to only hold $50.<span style="mso-spacerun: yes;"> </span>Total financial assets has risen to $250.<span style="mso-spacerun: yes;"> </span>There has been actual saving of $50,
unconstrained by planned saving of zero, without any new money being created.</div>
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<br /></div>
<div class="MsoNormal">
The point here is that what facilitates the change in
investment and therefore actual saving, is not a savings decision, but a
portfolio decision.<span style="mso-spacerun: yes;"> </span>The reason bank
lending matters is because it is a form of portfolio decision and, indeed,
banks play a large part in the overall portfolio decisions.<span style="mso-spacerun: yes;"> </span>Money creation matters because it changes the
portfolio options for households and may therefore influence their portfolio
decisions. <span style="mso-spacerun: yes;"> </span>It is not the magic
ingredient that undoes the loanable funds model. </div>
<div style="mso-element: footnote-list;">
<br clear="all" />
<hr align="left" size="1" width="33%" />
<div id="ftn1" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a> Part
of the reason this whole issue doesn't figure much in more mainstream economics
is that there is a tendency to focus on analysing outcomes that are consistent
with plans, and less attention is given to the question of what happens when
they are not.</div>
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</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com9tag:blogger.com,1999:blog-5362801348602268473.post-35106581809198116782017-05-04T07:57:00.000-07:002017-05-05T06:03:33.376-07:00Comparative Advantage With Labour Inflexibility<!--[if gte mso 9]><xml>
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<br />
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My last post adapted Ricardo's model of comparative
advantage to include internationally mobile capital.<span style="mso-spacerun: yes;"> </span>However, what I think is much more important is the ability of labour to be redeployed between industries when production
patterns are disrupted by trade liberalisation.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So I thought I'd have a go at a version of Ricardo's model
that included just that.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">The Model</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There are two countries: England and Portugal, and three
goods: wine, cloth and cars.<span style="mso-spacerun: yes;"> </span>Each
country consumes all three goods and can produce all three.<span style="mso-spacerun: yes;"> </span>Each country has its own currency.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Labour is the only factor input and there are constant
returns to scale.<span style="mso-spacerun: yes;"> </span>Prices are set at a
fixed mark-up to unit cost, with the same mark-up in both countries and all
industries.<span style="mso-spacerun: yes;"> </span>Within each country, a
single fixed nominal wage applies to all industries. <span style="mso-spacerun: yes;"> </span>(For simplicity, the nominal wage per unit of
labour, grossed up for the mark-up, is set here at one unit of the local
currency, so the price of local produce is simply equal to the requisite labour
input.)</div>
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<br /></div>
<div class="MsoNormal">
Labour cannot move between countries.<span style="mso-spacerun: yes;"> </span>Within a country, labour can generally be
redeployed between different industries, with the single exception that labour
currently employed in car production cannot be redeployed to wine or cloth
production.<span style="mso-spacerun: yes;"> </span>The number of labour units
required to produce one unit of goods varies between industry and country as
follows:</div>
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<br /></div>
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<br /></div>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Wine</b></div>
</td>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Cloth</b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b style="mso-bidi-font-weight: normal;">Cars</b></div>
</td>
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<tr style="mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b style="mso-bidi-font-weight: normal;">England</b></div>
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1.00</div>
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1.00</div>
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1.00</div>
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<b style="mso-bidi-font-weight: normal;">Portugal</b></div>
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0.80</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
0.90</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
0.95</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There is free trade in wine and cloth but (at least,
initially) no trade in cars.<span style="mso-spacerun: yes;"> </span>In each
case of wine, cloth and cars, Portugese made versions are perfect substitutes
for English made ones and there are no transport costs so, where there is free
trade,<span style="mso-spacerun: yes;"> </span>everyone just buys the cheapest.<span style="mso-spacerun: yes;"> </span>However, wine, cloth and cars are imperfect
substitutes for each other with a constant elasticity of substitution.<span style="mso-spacerun: yes;"> </span>All income is spent currently on consumption,
with a weighting in both countries of 0.45 on each of wine and cloth and 0.10
on cars.<span style="mso-spacerun: yes;"> </span>The exact specification of
consumer spending is given in the technical note at the end of the post. <sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"></span></sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">As there is no saving, trade must be balanced, which is achieved
by a variable exchange rate.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">(To get the numbers to show what I want, I have assumed a slightly higher labour supply in England than Portugal.)</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">1. No International
Trade in Cars</span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Because of the comparative advantages in wine and cloth, England
ends up importing all its wine and Portugal all its cloth.<span style="mso-spacerun: yes;"> </span>Both countries produce their own cars.</span></div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 612px;">
<tbody>
<tr style="height: 12.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">England</span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal</span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Total</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Total</span></b></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Labour</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,081</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">119</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">87</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Goods</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Produced</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,081</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">119</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,142</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">91</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Traded</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">563</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-563</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumed</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">563</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">533</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">119</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">579</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">91</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 11;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 12;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Expenditure</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 13;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Domestic</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">533</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">119</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">463</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">450</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">87</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 14;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exports</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">450</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">450</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 15;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Imports</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-548</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-548</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-450</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-450</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 16;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Income</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,081</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">119</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">87</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 17;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 18;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 19;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Prices</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Index</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Index</span></b></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 20;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Domestic</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.800</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.900</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.950</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.856</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 21;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Import</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.973</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.095</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">n/a</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.822</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.822</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">n/a</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 22;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumer</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.973</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.988</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.800</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.822</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.950</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.823</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 23;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 24;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 25; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exchange
rate (£/€)</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.217</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Expenditure and prices are shown in the local currency. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">The domestic producer prices shown are the prices that would be
paid for domestically produced product, even though there is no actual
production in industries with import penetration.<span style="mso-spacerun: yes;"> </span>The index for these prices is weighted by
consumption preference, so it is the price index that would apply with no
trade.<span style="mso-spacerun: yes;"> </span>This is higher for both
countries than the actual consumer price index, showing that the trade in wine and cloth benefits both nations.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">The nominal wage (expressed in the local currency) is the same in
each country, so the fact that the consumer price index is higher in England implies that real wages are lower in England than Portugal.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">2 After
Trade Liberalisation in Cars</span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
At the prevailing exchange rate, England can produce cars
more cheaply than Portugal.<span style="mso-spacerun: yes;"> </span>This means
that Portugal starts to import cars and closes down its own production. <span style="mso-spacerun: yes;"> </span>By assumption, these workers cannot be
employed elsewhere, so overall income in Portugal is reduced.<span style="mso-spacerun: yes;"> </span>This reduces demand for cloth imports but,
because of the additional import of cars, demand for foreign exchange is
increased overall.<span style="mso-spacerun: yes;"> </span>This causes the exchange
rate to change, worsening the terms of trade for Portugal (making Portugese cars cheaper but still not as cheap as English ones).</div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 612px;">
<tbody>
<tr style="height: 12.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">England</span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal</span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Total</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Total</span></b></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Labour</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">982</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">218</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Goods</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Produced</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">982</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">218</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,142</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Traded</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">607</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-460</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-102</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-607</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">460</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">102</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumed</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">607</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">522</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">116</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">535</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">460</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">102</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 11;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 12;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Expenditure</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 13;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Domestic</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">562</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">522</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">116</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">428</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">397</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">88</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 14;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exports</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">460</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">102</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">562</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">485</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">485</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 15;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Imports</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-562</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-562</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-397</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-88</span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border: none; height: 12.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-485</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 16;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Income</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">982</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">218</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,200</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 17;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 18;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 19;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Prices</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Index</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cars</span></b></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Index</span></b></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 20;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Domestic</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.800</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.900</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.950</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.856</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 21;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Import</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.927</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.043</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.101</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.863</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.863</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.863</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 22;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumer</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.927</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.000</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.966</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.800</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.863</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.863</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.833</span></div>
</td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 23;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 24;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
<tr style="height: 12.0pt; mso-yfti-irow: 25; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.0pt;" valign="bottom" width="140">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exchange
rate (£/€)</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-size: 9.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.159</span></div>
</td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 26.0pt;" valign="bottom" width="35"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
<td nowrap="" style="height: 12.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.0pt;" valign="bottom" width="55"><br /></td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
England responds to falling cloth exports by redeploying
labour to production of more cars.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Conclusions</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The main result here is that, if trade liberalisation
results in job losses and those workers cannot be employed elsewhere, then
overall output will be impaired.<span style="mso-spacerun: yes;"> </span>This is
perhaps not entirely surprising.<span style="mso-spacerun: yes;"> </span>But
there are some more interesting points here:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Trade liberalisation results in production of cars switching
to England even though Portugal can produce cars with fewer labour units and
thus has an absolute advantage in car production.<span style="mso-spacerun: yes;"> </span>The reason is that English wages are lower
when expressed in a common currency.<span style="mso-spacerun: yes;"> </span>The
lower wage offsets the less efficient production (less efficient in an absolute
sense, not a comparative one).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In this example trade liberalisation in car production not
only results in unemployment for Portugese car workers, but actually reduces
the real wages of Portugese wine workers.<span style="mso-spacerun: yes;">
</span>This is because the increased demand for imports worsens the terms of
trade.<span style="mso-spacerun: yes;"> </span>Although they can now buy cheap
imported cars, cloth has become more expensive.<span style="mso-spacerun: yes;">
</span>Everyone in Portugal has lost out.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The same is true here even if we relax the assumption that Portugese
car workers cannot be employed in other industries.<span style="mso-spacerun: yes;"> </span>As a natural importer of cars, Portugal
benefits when international trade in cars is restricted, even though that means
that cars are more expensive there.<span style="mso-spacerun: yes;">
</span>However, it is still better off than if there were no trade at all.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Reducing the nominal wage in Portugal makes no difference, as
it simply leads to an offsetting exchange rate movement.<span style="mso-spacerun: yes;"> </span>However, relative wages between industries do
matter.<span style="mso-spacerun: yes;"> </span>I have assumed that the same
wage applies across industries, so that wages for Portugese car workers remain the
same as for wine workers, even when they cannot be employed elsewhere.<span style="mso-spacerun: yes;"> </span>If they were to fall (relatively), then Portugese
car production could be preserved.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This change in relative wages is what standard economics
says should happen.<span style="mso-spacerun: yes;"> </span>It all comes down to
opportunity cost.<span style="mso-spacerun: yes;"> </span>The opportunity cost
of Portugese car production is in fact zero, because the car workers have no
alternative use.<span style="mso-spacerun: yes;"> </span>Portugese car production
is lost, because the cost to producers does not reflect the true opportunity
cost.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Although trade liberalisation in the car industry is
damaging in this example, that does not imply that introducing measures to restrict
existing trade will be beneficial.<span style="mso-spacerun: yes;"> </span>In
fact any such measures would reduce welfare here.<span style="mso-spacerun: yes;"> </span>If we extend the assumption on labour
inflexibility, then such measures may be even more damaging as workers made unemployed from exporting industries might not be employed elsewhere.<span style="mso-spacerun: yes;"> </span>It is
the fact of change that matters here,
not whether it is liberalisation or protectionism.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, being able to adapt to change is crucial to an
economy's ability to develop and grow.<span style="mso-spacerun: yes;">
</span>Even without trade, progress involves old products and procedures dying
out and being replaced.<span style="mso-spacerun: yes;"> </span>Job losses and
job creation is an inevitable part of that.<span style="mso-spacerun: yes;">
</span>Whilst there is a strong case for factoring in the dynamic consequences
of trade liberalisation, that cannot be an excuse for avoiding the need for flexibility,
if an economy is to secure long-term growth. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Technical Note</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Consumption of good i in each country is given by <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
C<sub>i</sub> = a<sub>i</sub> . (P<sub>i</sub> / P )<sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">-σ</span></sup>
. Y / P</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
where: a<sub>i</sub> is the weighting, <span style="mso-spacerun: yes;"> </span>C<sub>i</sub> is number of units consumed, P<sub>i</sub>
is the price of good, Y is nominal income and P is the price index, which is
given by:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
P = { sum for i [ a<sub>i</sub> . p<sub>i</sub><sup>(1-</sup><sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">σ)</span></sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> ] }</span><sup>1/(1-</sup><sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">σ)</span></sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
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countries.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com2tag:blogger.com,1999:blog-5362801348602268473.post-5486765918884607642017-05-01T01:37:00.001-07:002017-05-01T01:37:11.045-07:00Comparative Advantage And Offshoring<!--[if gte mso 9]><xml>
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<br />
<div class="MsoNormal">
In a recent <a href="https://rwer.wordpress.com/2017/04/29/the-benefits-of-free-trade-a-fallacy-based-on-a-fantasy/" target="_blank">post</a> Lars Syll quotes Steve Keen on Ricardo's
model of comparative advantage.<span style="mso-spacerun: yes;"> </span>Keen thinks
you can "prove" that the idea that free trade benefits all is a
fallacy by considering the following:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
"Ricardo’s model assumed that you could produce wine or
cloth with only labour, but of course you can’t. You need machines as well, and
machinery is specific to each industry. The essential machinery for making wine
can’t be used to make anything else, if its use becomes unprofitable. It is
either scrapped, sold at a large loss, or shipped overseas. Ditto a spinning
jenny, or a steel mill: if making steel becomes unprofitable, the capital
involved in its production is effectively destroyed …"</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now, I think there is a lot to be said on the topic of
trade, including a case to be made that certain protectionism can benefit all in
particular circumstances.<span style="mso-spacerun: yes;"> </span>But I found Keen's
statement rather odd, because it is not obvious to me that the message in Ricardo's
model has anything to do with whether or not there is machinery, whether it has
specific use and whether it can be offshored.<span style="mso-spacerun: yes;">
</span>So, I thought I'd look at what Ricardo's model might look like with
those modifications. <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">The Model</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There are two countries: England and Portugal.<span style="mso-spacerun: yes;"> </span>Each can produce wine and cloth.<span style="mso-spacerun: yes;"> </span>The production function in each case is
Cobb-Douglas with equal weightings on capital and labour:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
X<sub>ij</sub> = A<sub>ij</sub> . K<sub>ij</sub><sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">0.5</span></sup>
. L<sub>ij</sub><sup>0.5</sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
where X<sub>ij</sub> is production of product i in country j
and K<sub>ij </sub>and L<sub>ij</sub> are capital and labour respectively used
to produce product i in country j.<span style="mso-spacerun: yes;"> </span>A<sub>ij</sub>
is a factor specific to each industry and country intending to reflect the different
skills of labour (and is not therefore a technology that can be transferred
between countries).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The capital stock consists of a fixed supply of
machines.<span style="mso-spacerun: yes;"> </span>Machines are either wine machines
or cloth machines; they cannot be transferred between these uses.<span style="mso-spacerun: yes;"> </span>However in some scenarios, they can be transported
between countries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Labour<span style="mso-spacerun: yes;"> </span>cannot move
between countries, but it can be used in either industry within a country.<span style="mso-spacerun: yes;"> </span>The labour stock in each country is fixed and
assumed to be fully employed. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Each country has its own currency.<span style="mso-spacerun: yes;"> </span>The nominal wage is fixed in local currency
units.<span style="mso-spacerun: yes;"> </span>Products are sold at marginal
cost.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
For simplicity, households in each country are assumed to
want to consume wine and cloth in equal quantities.<span style="mso-spacerun: yes;"> </span>This means factor allocation must ensure equal
global output of the two products.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The matrix of the values for A is as follows:</div>
<div class="MsoNormal">
<br /></div>
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<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
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<br /></div>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
England</div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
Portugal</div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Wine</div>
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1.0</div>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1.2</div>
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<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Cloth</div>
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<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1.0</div>
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<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1.1</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Factor endowments are as follows:</div>
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<br /></div>
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<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
England</div>
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<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
Portugal</div>
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<tr style="mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Wine machines</div>
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<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1,000</div>
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<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1,000</div>
</td>
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<tr style="mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Cloth machines</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1,000</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
1,000</div>
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</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Total labour</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
2,000</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
2,000</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Portugal has a natural absolute advantage in both products,
but England has a natural comparative advantage in cloth.<span style="mso-spacerun: yes;"> </span>Unlike in Ricardo's model, however the marginal
comparative advantage varies with the allocation of inputs, because of the production
function.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Various scenarios are considered below:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">1. No Trade</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
England will employ equal amounts of labour in each
industry; Portugal will need to employ more in production of cloth than wine to
compensate for the lower labour productivity in that industry.</div>
<div class="MsoNormal">
</div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 527px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">England</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Factor Usage</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Machines</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Labour</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">913</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,087</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Products</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Output</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,147</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,147</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Traded</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumed</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,147</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,147</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Local price</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.59</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.90</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.0pt;" valign="bottom" width="44"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2.00</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2.00</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The relative price of each product is different for the two
countries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">2. Free Trade But No
Free Movement of Capital</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
England increases its employment in cloth production, where
it has a comparative advantage, and Portugal reduces its cloth employment.<span style="mso-spacerun: yes;"> </span>Prices move in each country so that the
relative price of each product is the same.<span style="mso-spacerun: yes;">
</span>The exchange rate settles at the level which equates the price of each
product between the two countries. </div>
<div class="MsoNormal">
</div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 525px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">England</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Factor Usage</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Machines</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Labour</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">994</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,006</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">907</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,093</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Products</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Output</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,196</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,103</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">952</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,045</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Traded</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-49</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">44</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">49</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-44</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumed</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,148</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,148</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,001</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,001</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Local price</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.66</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.82</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.90</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2.09</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 12;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 13;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Profit per machine (€)</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.99</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.01</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.79</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.95</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 14;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 15;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exchange rate (€/£)</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.87</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 16;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 17;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal's Balance of Payments (€)</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 18;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine exports</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">81</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 19;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth imports</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-81</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 20; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Net</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Expressed in a common currency the profit per machine is
higher in Portugal in both industries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Both countries benefit from increased consumption, although the gain is surprisingly
small.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">3. Free Trade With Free Movement
of Capital</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here we allow machines owned in one country to be used in
production in the other country - a kind of offshoring.<span style="mso-spacerun: yes;"> </span>This acts to equate the profitability of
machines in each country (but not between industries are all the machines are
single use).<span style="mso-spacerun: yes;"> </span>In fact, profitability is
not equalised in wine production because there is a boundary condition when all
wine production moves to Portugal.</div>
<div class="MsoNormal">
</div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 525px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td colspan="2" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 96.0pt;" valign="bottom" width="128">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">England</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth</span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Factor Usage</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Machines</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2,000</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">335</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,665</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Labour</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,668</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">332</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: #538ed5; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2,000</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Products</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Output</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2,192</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">367</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,825</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Traded</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-1,044</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">781</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,044</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-781</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Consumption</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,148</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,148</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,044</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,044</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Local price</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.52</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1.81</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">n/a</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">2.19</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 12;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 13;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Profit per machine (€)</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.83</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.99</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">n/a</span></div>
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<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.99</span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 14;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 15;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Exchange rate (€/£)</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0.83</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 16;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 17;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Portugal's Balance of Payments (€)</span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 18;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Wine exports</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">1,589</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 19;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Cloth imports</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-1,415</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 20;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Investment income received</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">660</span></div>
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<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 21;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Investment income paid</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">-834</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 22; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 6.0cm;" valign="bottom" width="227">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Net</span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.9pt;" valign="bottom" width="68">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">0</span></div>
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<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 45.1pt;" valign="bottom" width="60"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 31.65pt;" valign="bottom" width="42"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><br /></td>
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Although in the last scenario, cloth machines were more
profitable in Portugal, wine production shifts so extensively that this position
reverses and it becomes profitable to relocate cloth machines to England. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We still have free trade so prices are equalised as before,
although there is no price for domestically produced English wine.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The balance of payments now includes remission of profits
based on the number of machines used overseas and their profitability.<span style="mso-spacerun: yes;"> </span>(There are no net capital flows for the
transfer of machines between countries because the purchase price cancels out
the equity investment.) </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The overall benefit from the free movement of capital is
much greater than for free trade alone, but it is heavily skewed in England's
favour.<span style="mso-spacerun: yes;"> This might seem odd given that production in England has actually fallen (based on scenario 2 prices) but it reflects the net foreign income flow.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There is also a shift in functional income distribution,
arising from the equalisation of machine profitability and a shift of the exchange
rate in Portugal's favour.<span style="mso-spacerun: yes;"> </span>Overall, real
wages fall for English workers and rise for Portugese ones, whilst profits rise
for English capital owners and fall for Portugese ones.<span style="mso-spacerun: yes;"> </span>These are the expected results of offshoring.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Conclusion</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This model is certainly not intended to constitute a
proof.<span style="mso-spacerun: yes;"> </span>But I find it helpful in thinking
about how the ideas in Ricardo's model might apply with internationally mobile
capital. <span style="mso-spacerun: yes;"> </span>And on the whole, I'd say that
these particular issues do not really change the conclusions.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Keen also mentions scrapping of machinery.<span style="mso-spacerun: yes;"> </span>This does not occur in my model, because the particular production function ensures that capital is always useful.<span style="mso-spacerun: yes;"> </span>In fact, I suspect that machinery obsolescence
does not change the analysis either, but I do think that under-employment of labour
is very relevant.<span style="mso-spacerun: yes;"> </span>This in my view provides
much better grounds for critiquing the real-life application of comparative
advantage.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com21tag:blogger.com,1999:blog-5362801348602268473.post-32217876415278992642017-03-08T11:03:00.001-08:002017-03-08T11:03:50.009-08:00Trade, the Exchange Rate and Real Wages in the UK<!--[if gte mso 9]><xml>
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Simon-Wren Lewis wrote an interesting <a href="https://mainlymacro.blogspot.co.uk/2017/03/why-its-your-bloody-gdp-not-ours.html" target="_blank">post</a> recently, which
among other things referred to the impact of sterling depreciation on UK real
wage levels.</div>
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<br /></div>
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Any increase in domestic demand in the UK will lead to a
greater demand for imports and potential pressure on the exchange rate.<span style="mso-spacerun: yes;"> </span>A weaker exchange rate means a higher level
of demand can be sustained with the same level of trade balance, but this has
implications for real wages.</div>
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<br /></div>
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What I thought would be useful was to make a rough estimate
of what exchange rate would be needed if UK GDP for 2016 were to be 5% higher, but with a comparable trade deficit and what this would imply for real wage levels.<span style="mso-spacerun: yes;"> </span>To do this, I have set up a simple model using
estimated parameters.<span style="mso-spacerun: yes;"> </span>These are based on
a combination of my own estimates and third party estimates.<span style="mso-spacerun: yes;"> </span>Exact
specification of the model used is given at the end of the post.</div>
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<br /></div>
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It should be stressed that all of the parameters used here
are for long-term elasticities.<span style="mso-spacerun: yes;"> </span>Most
transactions are based on the use of established suppliers.<span style="mso-spacerun: yes;"> </span>Volumes and, to some extent, prices do not
respond quickly to exchange rate movements.<span style="mso-spacerun: yes;">
</span>If an exchange rate movement is subsequently reversed, there may be no
noticeable effect at all.<span style="mso-spacerun: yes;"> </span>However,
companies do choose where to supply from and long-term differences in cost will
effect this. </div>
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<br /></div>
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The point here is that this is not indicative of how the
economy will respond in the immediate period following a depreciation.<span style="mso-spacerun: yes;"> </span>This is an exercise in counterfactuals
or comparative statics.</div>
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<br /></div>
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The scenario I wanted to consider here was what variation in
the exchange rate would be required to maintain the trade balance at a constant
percentage of GDP, were GDP to be 5% higher, based on 2016 figures.<span style="mso-spacerun: yes;">
</span>It turns out that this requires an exchange rate that is
13.4% lower.<span style="mso-spacerun: yes;"> </span>It also requires domestic
expenditure to be 4.5% higher.</div>
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<br /></div>
<div class="MsoNormal">
The table below shows the percentage difference in each of
the variables:</div>
<div class="MsoNormal">
<br /></div>
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<b style="mso-bidi-font-weight: normal;">Variable</b></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;">Variation</b></div>
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Exchange rate</div>
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-13.4%</div>
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Export price index</div>
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+7.8%</div>
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Import price index</div>
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+9.2%</div>
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Domestic expenditure price index</div>
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+2.5%</div>
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GDP deflator</div>
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+2.1%</div>
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Export volume</div>
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+1.5%</div>
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Import volume</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 134.35pt;" valign="top" width="179">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
+0.1%</div>
</td>
</tr>
<tr style="mso-yfti-irow: 8;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Domestic expenditure volume</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 134.35pt;" valign="top" width="179">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
+4.5%</div>
</td>
</tr>
<tr style="mso-yfti-irow: 9; mso-yfti-lastrow: yes;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
GDP</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 134.35pt;" valign="top" width="179">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
+5.0%</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here, the potential increase in import volume arising from
the higher expenditure is substantially offset by the fall in the exchange rate.<span style="mso-spacerun: yes;"> </span>Export volume grows slightly, as although
export prices rise, they do not rise as much as world prices in sterling terms.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A key assumption here is that domestic unit labour costs are
unchanged, so that the only thing impacting on these price indices is the change
in the sterling equivalent of world prices.<span style="mso-spacerun: yes;">
</span>Given the same level of productivity, the 2.5% higher domestic price
index implies 2.5% lower real wages.<span style="mso-spacerun: yes;">
</span>(Treating the consumer price index as being the same as that for all domestic expenditure - a simplification.)</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Sustaining the change in real exchange rate necessary to
achieve this result therefore requires that the reduction in real wage is
fully absorbed and is not eroded by increased wage inflation.<span style="mso-spacerun: yes;"> </span>(Of course the impact could be alternatively absorbed by a
change in production taxes or a reduction in profitability).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Model Specification</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Equations</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Real GDP is the sum of domestic expenditure and exports less
imports.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(1)<span style="mso-tab-count: 1;"> </span>gdp = dx +
ex - im</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(2)<span style="mso-tab-count: 1;"> </span>GDP = dx .
pd + ex . px - im . pm</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Exports vary based on the relative price with an elasticity
of -0.3.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(3)<span style="mso-tab-count: 1;"> </span>ex = 545 .
( px / pw )<sup><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">-0.3</span></sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Imports are based on relative price and both domestic expenditure
and exports.<span style="mso-spacerun: yes;"> </span>Exports have a much greater
concentration of import content than domestic expenditure, and this is
reflected by inclusion of a term for the share of exports in expenditure.<span style="mso-spacerun: yes;"> </span>The price elasticity used is -0.33.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(4)<span style="mso-tab-count: 1;"> </span>im = 0.3885
. ( dx + ex ) . [ ex / ( dx + ex ) ]<sup>0.34 </sup>. ( pm / pd )<sup>-0.33</sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The balance of trade is based on export and import volumes
and prices.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(5)<span style="mso-tab-count: 1;"> </span>BT = ex .
px - im . pm</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Price indices for imports, exports and domestic expenditure
prices are a weighted average of world prices and domestic unit labour costs. <span style="mso-spacerun: yes;"> </span>World prices here means some appropriate
measure of prices in the UK's main trading partners, translated into
sterling.<span style="mso-spacerun: yes;"> </span>General price levels in the
rest of the world is assumed unchanged so the only change is due to the
exchange rate.<span style="mso-spacerun: yes;"> </span>Domestic unit labour
costs are also assumed unchanged. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(6)<span style="mso-tab-count: 1;"> </span>pm = pw<sup>0.7
</sup>. ulc<sup>0.3</sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(7)<span style="mso-tab-count: 1;"> </span>px = pw<sup>0.6
</sup>. ulc<sup>0.4<span style="mso-spacerun: yes;"> </span></sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(8)<span style="mso-tab-count: 1;"> </span>pd = pw<sup>0.2
</sup>. ulc<sup>0.8</sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Variables</b></div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
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<b style="mso-bidi-font-weight: normal;">Name</b></div>
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<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b style="mso-bidi-font-weight: normal;">Description</b></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
BT</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Nominal trade balance</div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
dx</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Real domestic expenditure</div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
ex</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Real exports</div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
gdp</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Real GDP</div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
GDP</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Nominal GDP</div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
im</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Real imports</div>
</td>
</tr>
<tr style="mso-yfti-irow: 7;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
pd</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Price of domestic expenditure</div>
</td>
</tr>
<tr style="mso-yfti-irow: 8;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
pm</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Price of imports</div>
</td>
</tr>
<tr style="mso-yfti-irow: 9;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
pw</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
World prices (translated into sterling)</div>
</td>
</tr>
<tr style="mso-yfti-irow: 10;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
px</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
Price of exports</div>
</td>
</tr>
<tr style="mso-yfti-irow: 11; mso-yfti-lastrow: yes;">
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 104.4pt;" valign="top" width="139">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
ulc</div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 231.05pt;" valign="top" width="308">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
UK unit labour costs</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Unit labour costs and all prices are indexed at 1 for 2016 and volume is measured
in 2016 prices.<span style="mso-spacerun: yes;"> </span>dx and pw are set to
give the required level of gdp and ratio of BT to GDP.</div>
<div class="MsoNormal">
<br /></div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-31838898448723953512017-03-02T01:59:00.002-08:002017-03-02T01:59:50.594-08:00Role of the Exchange Rate in Portfolio Preference Weightings<!--[if gte mso 9]><xml>
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Brian Romanchuk has a <a href="http://www.bondeconomics.com/2017/03/primer-understanding-portfolio.html" target="_blank">post</a> on portfolio allocation,
including its representation in SFC models.<span style="mso-spacerun: yes;">
</span>One area he discusses compares different ways of weighting portfolios.</div>
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In Monetary Economics, Godley & Lavoie use portfolio
allocation functions that assign fixed weights to different asset classes
(subject to changes in relative expected returns).<span style="mso-spacerun: yes;"> </span>In the context of international allocations
this means, for example, that investors in Country A allocate x% of investment
to domestic assets and (100 - x)% to Country B assets.</div>
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If we ask ourselves what kind of value x might be, it should
seem that it depends to some extent on the relative size of the economies of
Country A and Country B.<span style="mso-spacerun: yes;"> </span>If the economy
of Country B is only 10% the size of that of Country A, it is unlikely that
Country A investors are going to be investing 50% of their assets there, or
even 25%.</div>
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We should expect investors to show some home preference, but
beyond that we should expect the amount that investors wish to invest in a
particular country to be influenced by the relative size of its economy.</div>
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<br /></div>
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How do we compare the size of different economies?<span style="mso-spacerun: yes;"> </span>We have to translate GDP's into a common
currency using suitable exchange rates.<span style="mso-spacerun: yes;"> </span>Therefore,
if we wanted to have portfolio allocation functions that reflected the
different sizes of economies, we would need to include exchange rates in these
functions.<span style="mso-spacerun: yes;"> </span>This is not the route that
Godley & Lavoie take.<span style="mso-spacerun: yes;"> </span></div>
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This may seem like a relatively unimportant point but, as I
have stressed <a href="http://monetaryreflections.blogspot.co.uk/2017/02/global-saving-and-current-account.html" target="_blank">before</a>, portfolio preference actually has a big impact.<span style="mso-spacerun: yes;"> </span>How international weightings are determined
can make a big difference to the response to changes in trade propensities, including
whether that response is primarily an exchange rate response or a trade balance
response.</div>
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Unfortunately, it's very difficult to identify portfolio
allocation behaviour from the data, so it's hard to form a view on this.<span style="mso-spacerun: yes;"> </span>My guess is that weightings are based on
relative sizes of economies, but only in the longer run. <span style="mso-spacerun: yes;"> </span>That is, weightings do not adjust to
short-term movements in the exchange rate, but over time they come back into
line.<span style="mso-spacerun: yes;"> </span>This would seem to fit with a
rule-of thumb approach to dealing with Brian's observation that it is best to
adjust weightings for trend movements, but not for fluctuations.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-63745316998749141862017-02-26T02:25:00.003-08:002017-02-26T02:25:52.405-08:00Wage Inflation and Unemployment in the UK<!--[if gte mso 9]><xml>
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<div class="MsoNormal">
As a further follow up on the NAIRU discussions mentioned in
my last two posts, I have looked at the historical relationship between wage
inflation and unemployment in the UK.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The first of the two graphs below shows annual change in
average earnings against unemployment from 1973 to 2016.<span style="mso-spacerun: yes;"> </span>The second graph shows the change in the
change, what we might think of as the acceleration of wage inflation.<span style="mso-spacerun: yes;"> </span>I have divided the points into three periods: </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1973 - 1979: the period before the Thatcher government</div>
<div class="MsoNormal">
1980 - 1991: up to inflation targeting</div>
<div class="MsoNormal">
1992 - 2016: the period of inflation targeting</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The trend line covers the whole period.</div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
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" 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" /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A few points are worth making here.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Both charts show quite a wide scatter.<span style="mso-spacerun: yes;"> </span>Although both show a vague trend across the
whole period, the correlation is not particularly strong in either.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Although the correlation is somewhat weak, the charts
suggest that both the level of wage inflation and its acceleration are negatively
correlated with unemployment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There appears to be a somewhat better correlation if we look
at the periods individually.<span style="mso-spacerun: yes;"> </span>Each
individual period generally continues to show the same direction of correlation.<span style="mso-spacerun: yes;"> </span>However, the steepness declines over time,
both in relation to wage inflation and its acceleration.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
For the period of inflation targeting, there appears to be
very little correlation between unemployment and the actual level of wage
inflation, whilst there is still a slight correlation with its
acceleration.<span style="mso-spacerun: yes;"> </span>This is probably the
opposite of what I would have expected.</div>
<div class="MsoNormal">
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I addition to displaying the steepest relationship, the plot
for the 70's also shows the greatest scatter.<span style="mso-spacerun: yes;">
</span>This probably reflects various external factors such as the oil price
shock and the social contract.</div>
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The only really clear conclusion here is that the
relationship between these variables is a complex one, but it does appear that
there is some connection between unemployment and not only, wage inflation, but
also its acceleration.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com3tag:blogger.com,1999:blog-5362801348602268473.post-28733481683616853852017-02-20T02:29:00.002-08:002017-02-20T02:29:53.221-08:00Unemployment, Vacancies and Wage Inflation<!--[if gte mso 9]><xml>
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Simon Wren-Lewis's <a href="https://mainlymacro.blogspot.co.uk/2017/02/nairu-bashing.html" target="_blank">post</a> on the NAIRU (that I discussed in
may last <a href="http://monetaryreflections.blogspot.co.uk/2017/02/the-nairu-and-nominal-wage-rigidity.html" target="_blank">post</a>) prompted a lot of interesting comments.<span style="mso-spacerun: yes;"> </span>I thought it worth expanding a bit on what I
wrote previously. <span style="mso-spacerun: yes;"> </span>The chart below shows
unemployment and vacancies in the UK.</div>
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<div class="MsoNormal">
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The obvious thing here is that there is a negative
correlation between the two.<span style="mso-spacerun: yes;"> </span>Higher vacancies
are associated with lower unemployment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This reflects the level of overall demand in the
economy.<span style="mso-spacerun: yes;"> </span>Higher demand leads firms
wanting to take on more staff and therefore to the creation of more vacancies.<span style="mso-spacerun: yes;"> </span>Some of these positions will be filled by the
unemployed, reducing their numbers.<span style="mso-spacerun: yes;">
</span>Other positions will remain unfilled.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The filling of vacancies does not always come from the ranks
of the unemployed.<span style="mso-spacerun: yes;"> </span>In some cases, firms
will hire by enticing workers to move from other firms (I would guess this is actually
the majority of cases, but I don't know where to find data on this).<span style="mso-spacerun: yes;"> </span>This process generally requires recruiting
firms to offer higher wages.<span style="mso-spacerun: yes;"> </span>The more
vacancies they need to fill, the more pressure to raise wage offers.<span style="mso-spacerun: yes;"> </span>At the same time, other firms may need to
raise wages to prevent staff leaving.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The more vacancies there are then, the more wage inflation
pressure there is.<span style="mso-spacerun: yes;"> </span>And the relationship
between vacancies and unemployment is clear.<span style="mso-spacerun: yes;">
</span>The much more difficult question is whether this wage inflation pressure
gives rise to stable inflation or accelerating inflation.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-8979357994838186772017-02-18T02:31:00.000-08:002017-02-18T02:31:26.373-08:00The NAIRU and Nominal Wage Rigidity<!--[if gte mso 9]><xml>
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Simon Wren-Lewis has a <a href="https://mainlymacro.blogspot.co.uk/2017/02/nairu-bashing.html" target="_blank">post</a> discussing the NAIRU.<span style="mso-spacerun: yes;"> </span>He acknowledges that it has its problems but
struggles to find a good alternative.</div>
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<br /></div>
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The idea with the NAIRU is that, when unemployment falls
below that level, we don't simply have a higher rate of inflation, we have an
ever increasing rate of inflation.</div>
<div class="MsoNormal">
<br /></div>
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The theory here is that wage inflation reflects an attempt
by workers to secure a particular real wage, based on their expectations of
price inflation.<span style="mso-spacerun: yes;"> </span>If they are thwarted by
price inflation higher than expected they will revise their expectations and
increase their demands.</div>
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<br /></div>
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However, whilst wage inflation may sometimes be driven by real
wage concerns, it is not clear this should generally the case.<span style="mso-spacerun: yes;"> </span>Particularly at lower levels of inflation, changes
in aggregate wages may have little to do with real wage considerations. </div>
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<br /></div>
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First of all, it is worth noting that the inflation rate,
and the rate of wage inflation, are aggregate figures.<span style="mso-spacerun: yes;"> </span>At any time, some firms will be facing supply
constraints and will be bidding up wages.<span style="mso-spacerun: yes;">
</span>Others will find themselves with excess capacity and will be holding
wages constant (or in rare cases, cutting them).<span style="mso-spacerun: yes;"> </span>The balance will vary with the level of aggregate
demand.<span style="mso-spacerun: yes;"> </span>There isn't a single labour
market and a single wage.</div>
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<br /></div>
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One of the reasons why the idea of a single wage might be unhelpful
is to do with nominal wage rigidity.<span style="mso-spacerun: yes;"> </span>On
the whole, wages are not subject to constant revision.<span style="mso-spacerun: yes;"> </span>An individual worker's wage is fixed when he
is first employed and then only changed when there is sufficient reason to do
so. <span style="mso-spacerun: yes;"> </span></div>
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<br /></div>
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At low inflation rates, therefore, most wage inflation
arises from the turnover in jobs, where some firms are hiring and others are
firing.<span style="mso-spacerun: yes;"> </span>The lower the level of
unemployment, the more that turnover requires hiring firms tempting workers to
change jobs, rather than simply drawing on the pool of unemployed.<span style="mso-spacerun: yes;"> </span>This requires greater wage differentials.</div>
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<br /></div>
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Actual cuts in nominal wages are unusual.<span style="mso-spacerun: yes;"> </span>Having greater wage differentials therefore requires
having a higher minimum average level wage inflation when unemployment is
lower.<span style="mso-spacerun: yes;"> </span>The higher average means the
wages that are growing the least are not actually falling.</div>
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<br /></div>
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Real wages play no role in this.<span style="mso-spacerun: yes;"> </span>It is all to do with relative wages.<span style="mso-spacerun: yes;"> </span>So there's no question of foiled expectations
or any reason to think that this inflation should accelerate.</div>
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<br /></div>
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All this means that, at low rates of inflation, we may well
have some kind of trade-off between unemployment and inflation, rather than the
accelerating inflation dictated by the NAIRU.<span style="mso-spacerun: yes;">
</span>However, if higher rates of inflation become the norm, this kind of
relationship may break down.<span style="mso-spacerun: yes;"> </span>If the
average rate of wage inflation is high, then cuts in relative wages can be
easily achieved simply by holding some nominal wages fixed for longer.<span style="mso-spacerun: yes;"> </span>The pay-off between inflation and
unemployment depends on the reluctance to cut nominal wages being relevant.</div>
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<br /></div>
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Furthermore, if it becomes normal to frequently adjust wages
to compensate for price inflation, then some measure of indexed wages starts to
replace the fixed nominal anchor as the benchmark for relative wage competition.</div>
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<br /></div>
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So, accelerating
inflation may still be a trap to fall into.<span style="mso-spacerun: yes;">
</span>However, as conceived here, this does not simply arise from venturing
past the NAIRU.<span style="mso-spacerun: yes;"> </span>It comes from allowing
inflation to persist at too high a level and for too long.<span style="mso-spacerun: yes;"> </span>It is true that this could come from trying
to achieve excessively low unemployment.<span style="mso-spacerun: yes;">
</span>But wages are not the only factor in determining price inflation.<span style="mso-spacerun: yes;"> </span>Things like exchange rates and world commodity
prices also play a role.<span style="mso-spacerun: yes;"> </span>On the whole,
it should be no surprise that it is difficult for advocates of the NAIRU to pin
down what the level of the NAIRU actually is.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com7tag:blogger.com,1999:blog-5362801348602268473.post-68465022957683344582017-02-03T02:59:00.000-08:002017-02-03T02:59:40.143-08:00Global Saving and Current Account Imbalances<!--[if gte mso 9]><xml>
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<div class="MsoNormal">
I've read various stuff recently on the role of savings
behaviour in the causes and effects of current account imbalances, some of
which I'd say is rather confused.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It has to be said that this is quite a tricky topic, because
it has a number of moving parts, various complicating factors and the common
problem of lack of clarity over what is being assumed unchanged when we invoke
the <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">ceteris
paribus</i></b> assumption.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here's one way I think about this question.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We start from the sectoral balances identity that says that private
sector net acquisition of financial assets (NAFA) is equal to the public sector
borrowing requirement (PSBR) plus the current account surplus (CAS).<span style="mso-spacerun: yes;"> </span>The PSBR we will assume is a negative function
of GDP (Y) and the current account surplus we will assume is a negative function
of GDP, a positive function of the GDP of the rest of the world (Y*) and a
negative function of the real exchange rate (e)<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>.<span style="mso-spacerun: yes;"> </span>Thus we have for each national economy:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
NAFA = PSBR ( Y ) + CAS ( Y, Y*, e )</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So, the first question is what happens if the private sector
in country A decides to increase its net saving, i.e. if NAFA rises?<span style="mso-spacerun: yes;"> </span>Well, the answer is that it depends.<span style="mso-spacerun: yes;"> </span>And what it depends on is a portfolio
decision<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[2]</span></span></span></span></a>.<span style="mso-spacerun: yes;"> </span>The portfolio decision here is whether the private
sector wants to accumulate domestic public sector assets or foreign assets.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the first instance, assume that the private sector wants
to accumulate domestic government bonds, so that PSBR increases to match the
rise in NAFA and the CAS stays unchanged.<span style="mso-spacerun: yes;">
</span>In order for the PSBR to rise (within our limited framework here), GDP
has to fall.<span style="mso-spacerun: yes;"> </span>And for the CAS to stay
constant with falling GDP (and constant GDP in other countries), the real exchange rate has to rise.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the alternative case, the private sector wants to
accumulate foreign assets, so the CAS must rise to match the increase in NAFA
whilst the PSBR remains unchanged.<span style="mso-spacerun: yes;"> </span>As
the PSBR is unchanged, GDP is unaffected and the real exchange rate falls to facilitate
the rise in the current account balance. <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
At this point, we need to turn to the implications of this for
other national economies.<span style="mso-spacerun: yes;"> </span>To do this,
let's assume there are only two countries, so for the other country - country B
- the current account surplus is simply the negative of country A's, and the
real exchange rate is the inverse of country A's.<span style="mso-spacerun: yes;"> </span>Country B has the same sectoral balances
equation and we will further assume that country B's NAFA does not change.<span style="mso-spacerun: yes;"> </span>Y* for country B is Y for country A and visa versa.
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the first instance, where country A's private sector accumulates
only domestic public sector debt, country B's CAS is unchanged, because country
A's CAS is unchanged.<span style="mso-spacerun: yes;"> </span>Therefore country
B's PSBR is also unchanged and so its GDP is unaffected.<span style="mso-spacerun: yes;"> </span>Country B experiences a fall in its own
exchange rate, but any impact on exports and imports is offset by the change in
Country A's GDP.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the second scenario, country A's GDP stays the same but country
B sees a rise in its own exchange rate and a fall (i.e. becoming more negative)
in its own current account surplus.<span style="mso-spacerun: yes;"> </span>As
its own NAFA is assumed unchanged, the fall in the CAS implies a rise in the
PSBR which implies that country B's GDP must fall.<span style="mso-spacerun: yes;"> </span>This fall in GDP feeds back into the function
for the CAS, but given our assumptions about country A, this only impacts on
the exchange rate not the actual level of the CAS.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So, the overall effects are as follows.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. If country A's private sector wants to save more, the
impact depends on whether it wants to accumulate domestic or foreign assets.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. If it wants to accumulate domestic assets, this will hit
domestic GDP and not foreign GDP.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
3. If it wants to accumulate foreign<span style="mso-spacerun: yes;"> </span>assets, this will hit foreign GDP and not
domestic GDP.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
4. Only in the latter case does a current account imbalances
arise. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Obviously, I've had to make many simplifications here.<span style="mso-spacerun: yes;"> </span>Two of particular importance are worth
noting.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
First, I have assumed that the portfolio decisions do not
depend on the exchange rate.<span style="mso-spacerun: yes;"> </span>In practice,
capital movements are sufficiently fluid in response to exchange rate
deviations that they can dominate the real exchange rate in the short term. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Secondly, I have ignored any kind of inflation mechanism in
the relationship between the real exchange rate and the level of GDP.<span style="mso-spacerun: yes;"> </span>If, in fact, certain levels of real exchange
rate create unmanageable inflation pressures, then domestic policy is likely to
respond by influencing the NAFA or the PSBR and this will have knock-on effects
for the analysis.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Notwithstanding these points, I think the general
conclusions still apply.<span style="mso-spacerun: yes;"> </span>This would
mean, for example, that the ability of the US to run a persistent current
account deficit is not so much about absolute savings behaviour in the rest of the world as the attraction of the
dollar as a vehicle for saving.</div>
<div style="mso-element: footnote-list;">
<br clear="all" />
<hr align="left" size="1" width="33%" />
<div id="ftn1" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>
The real exchange rate here is expressed as the number of foreign currency
units that can be purchased for one unit of the domestic currency.</div>
</div>
<div id="ftn2" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref2" name="_ftn2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[2]</span></span></span></span></a> In
my opinion, the role of portfolio decisions is one of the most important themes
of post-Keynesian economics.<span style="mso-spacerun: yes;"> </span>It
underlies liquidity preference and it goes to the heart of why the role of banks
matters to macro-economic outcomes.</div>
</div>
</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com6tag:blogger.com,1999:blog-5362801348602268473.post-86830309205219752132017-01-25T05:47:00.000-08:002017-01-25T05:47:16.862-08:00Understanding Household Spending with Stocks and Flows<!--[if gte mso 9]><xml>
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<br />
<div class="MsoNormal">
Household expenditure is the largest component of GDP, so
understanding why and how it varies is crucial to understanding recessions.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Mainstream economics tends to look to the real interest rate
and a household rate of time preference as the central explanation for such
variations.<span style="mso-spacerun: yes;"> </span>Stock flow models tend to
place greater emphasis on the levels of financial stocks.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The idea here is that household expenditure is driven by a
desire to influence various ratios between financial stocks and the level of
income.<span style="mso-spacerun: yes;"> </span>Stock-flow models often describe
certain target ratios, sometimes called stock-flow norms.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Household expenditure is equal to income<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>
less the net acquisition of net financial assets.<span style="mso-spacerun: yes;"> </span>If we can explain the acquisition and
disposal of financial assets and liabilities in terms of a desire to move towards stock-flow norms, then we can explain why household expenditure might
vary.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Looking at the UK, it is useful to divide household net
financial assets into the following:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. Pensions and life insurance</div>
<div class="MsoNormal">
2. Other financial assets</div>
<div class="MsoNormal">
3. Debt (i.e. liabilities of households)</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The graph below shows the level of each of these relative to
household disposal income.</div>
<div class="MsoNormal">
<br /></div>
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" /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I'll say something about each of these in turn, dealing
first with pensions, then debt, then other financial assets.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Pensions</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It seems likely that there should be some kind of target ratio between
pension assets and income.<span style="mso-spacerun: yes;"> </span>On the whole,
people want to achieve a balance between what they can spend during
their working years and what they can spend in retirement.<span style="mso-spacerun: yes;"> </span>This means they have to save a certain amount
whilst working to be run down in later life. This process is naturally going to
generate a stable stock-flow ratio.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In fact, we don't need to even postulate that people have a
given stock-flow ratio in mind.<span style="mso-spacerun: yes;"> </span>Much of
the time, the amount of pension contributions will be in a fixed relationship
to wage levels, and amounts paid as pensions will be related to the stock level
of pension funds.<span style="mso-spacerun: yes;"> </span>Institutional
arrangements including the tax system influence this.<span style="mso-spacerun: yes;"> </span>This process will give rise to a stock-flow
norm, even if no-one has such a ratio in mind.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If we look at the graph, however, we can see a clear upward
trend in the ratio of pension assets to income.<span style="mso-spacerun: yes;">
</span>There are various reasons for this.<span style="mso-spacerun: yes;">
</span>The most important is rising life expectancy.<span style="mso-spacerun: yes;"> </span>This has reduced the amount of pension income
that a given stock of pension assets will buy.<span style="mso-spacerun: yes;">
</span>Achieving a similar balance between working and retirement consumption
therefore means building a greater stock of pension assets during the working
lifetime.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The decline in the yields on government securities has a
similar effect.<span style="mso-spacerun: yes;"> </span>Pension annuities are
priced off fixed income yields, so as these have come down, pension funds need
to become larger.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The actual size of pension funds is also impacted by the
returns on those funds including stock market gains.<span style="mso-spacerun: yes;"> </span>So we should expect to see the actual ratio
rising when the stock market is doing well. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Debt</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The ratio of debt to income shows less fluctuations than the
two asset classes, because it is not subject to the sort of variations in value
due to market movements.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With debt levels, it also seems likely that that stock-flow
ratios are important.<span style="mso-spacerun: yes;"> </span>In particular,
credit constraints will tend to limit the amount that can be borrowed relative
to income.<span style="mso-spacerun: yes;"> </span>The growth in debt levels
between around 1999 and 2008 reflect a general relaxation of credit
criteria.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Maximum acceptable debt levels are often assessed by
comparing the interest expense to income.<span style="mso-spacerun: yes;">
</span>The upper bound to the debt to income ratio is therefore likely to be a
function of interest rates to some extent.<span style="mso-spacerun: yes;">
</span>At the current low level of rates, interest expense is at its lowest
level of this period (see chart below), which partly explains why the debt
ratio remains high despite tightening credit conditions.</div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
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" /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Credit constraints may impose a cap on this stock-flow
ratio, but that is not the same as saying this is a target ratio.<span style="mso-spacerun: yes;"> </span>It could be that households prefer a debt
ratio below that dictated by credit conditions.<span style="mso-spacerun: yes;">
</span>However, it seems likely that credit conditions provide the binding
constraint in most cases for new borrowers, and this element is a key driver of
the stock-flow ratio.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Other Assets</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Whilst there are good reasons for thinking that stock-flow considerations
play an important role in determining accumulation of pensions and debt, it is
less clear in the case of other assets.<span style="mso-spacerun: yes;">
</span>Typical stock-flow consistent models tend to assume that there is a
target ratio for holdings of other assets, but I'm not sure this is necessarily
the case.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With pensions and debt, we should be able to predict what
sort of target ratios we expect to see from a knowledge of things like life
patterns, the tax structures, regulatory issues and so on.<span style="mso-spacerun: yes;"> </span>No such considerations determine the holding
of other assets, so it's quite possible that any target ratio could develop
over time, including in response to changes in the actual.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, looking at the first graph, the ratio of other
assets has actually changed the least over time.<span style="mso-spacerun: yes;"> </span>Apart from an apparent slight upward trend,
two factors appear to drive the variations.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. As with pensions assets, the level of other financial assets
is subject to variations in asset valuations such as stock market movements.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. The periods of strong growth in debt levels seems to be
associated with an increase in holdings of other financial assets.<span style="mso-spacerun: yes;"> </span>There are reasons why we might expect this to
be the case.<span style="mso-spacerun: yes;"> </span>The largest part of debt is
for house purchase, and an increase in debt reflects a greater volume of house
purchase and/or higher house prices.<span style="mso-spacerun: yes;">
</span>This means that those households receiving property sales proceeds and
not repaying debt (otherwise overall debt levels are not increasing) are receiving
greater windfalls.<span style="mso-spacerun: yes;"> </span>This type of cash
receipt, does not get spend all at once, if it gets spend at all, and it
therefore adds to the accumulation<span style="mso-spacerun: yes;"> </span>of
deposits, which makes up the largest part of this catergory of assets.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Once these elements are taken into account, it does appear
that there is some reversion-to-norm taking place in this stock-flow ratio.<span style="mso-spacerun: yes;"> </span>When the actual ratio is increased or
decreased by one of these factors, accumulation reacts to bring it back to a
more "normal" level.<span style="mso-spacerun: yes;"> </span>It is
remains an open question, however, how stable this "normal" level is
over time.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Conclusion</b> </div>
<div style="mso-element: footnote-list;">
</div>
<div style="mso-element: footnote-list;">
</div>
<div style="mso-element: footnote-list;">
</div>
<div style="mso-element: footnote-list;">
</div>
<div style="mso-element: footnote-list;">
An analysis of household stock-flow ratios provides a useful insight on what drives changes in household spending. This is particularly so when we apply a certain level of disaggregation, rather than looking at net finacial assets as a single whole. Often, we can relate the trends to things that we know are going on. This approach is likely to be more useful than trying to relate spending to variations in the real interest rate.
<hr align="left" size="1" width="33%" />
<div id="ftn1" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span></span></span></a>
Household disposable income is usually calculated after certain pension
contributions and pension income.<span style="mso-spacerun: yes;"> </span>To
align more closely with the theoretical issues, we need here to think about household
income before these items.</div>
</div>
</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com4tag:blogger.com,1999:blog-5362801348602268473.post-54963853216478168832017-01-02T10:52:00.000-08:002017-01-05T04:17:35.649-08:00The Net Internation Investment Position and the Trade Balance <!--[if gte mso 9]><xml>
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In commenting on <a href="http://krugman.blogs.nytimes.com/2016/12/27/tariffs-and-the-trade-balance-wonkish/" target="_blank">tariffs and the trade balance</a>, Paul Krugman
states that, in the "simple story", tariffs result in an exchange
rate appreciation which leaves the trade balance unchanged.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A critical point here (which Krugman goes on to explore) is
the idea that neither tariffs nor any associated exchange rate appreciation has
any impact on capital account flows (or for that matter on the net flow of investment
income).<span style="mso-spacerun: yes;"> </span>However, the simple story also
contains an implicit assumption that the level of output is unchanged.<span style="mso-spacerun: yes;"> </span>If instead tariffs are accompanied by an
increase in domestic activity, demand for imports may be unchanged and there
may be no change in the exchange rate.<span style="mso-spacerun: yes;"> </span>It
all depends on what else we think might be going on.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
What interested me more here though was Krugman's assertion
that trade deficits must eventually be replaced by surpluses (and thanks to Matias Vernengo for drawing my attention to this comment).<span style="mso-spacerun: yes;"> </span>The idea he is appealing to is that a country
cannot have a negative net international investment position (NIIP) that grows
indefinitely.</div>
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<br /></div>
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In fact this comes down to an <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">r</i></b> versus <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">g</i></b>
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is the average rate of return on the NIIP.<span style="mso-spacerun: yes;">
</span>If <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">r</i></b> is less than <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">g</i></b>, then even with balanced trade, the
NIIP will be declining as a percentage of GDP.<span style="mso-spacerun: yes;">
</span>No trade surplus is ever needed to correct a negative NIIP.</div>
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<br /></div>
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The thing about <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">r</i></b> here is that it is an average
return and the NIIP is the difference between two larger numbers.<span style="mso-spacerun: yes;"> </span>For example the US NIIP of around negative $8
trillion is the difference between assets of $25 trillion and liabilities of
$33 trillion.<span style="mso-spacerun: yes;"> </span>This means that the
average return can vary greatly and can look nothing like a normal asset
return.<span style="mso-spacerun: yes;"> </span>For example, in the US case, if
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return on the NIIP can easily be negative.</div>
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<br /></div>
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This means that, in cases where the NIIP is small relative
to the gross positions, we cannot generally say anything meaningful about <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">r</i></b>
and it is quite possible that a country can run a trade deficit for ever
without any need for eventual surpluses.<span style="mso-spacerun: yes;">
</span>This is not, of course, the same as saying that a country can run any
level of trade deficit for ever.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com9tag:blogger.com,1999:blog-5362801348602268473.post-48520533874213146222016-12-05T06:56:00.000-08:002016-12-05T06:56:10.866-08:00Trade Measures and the Capital Account<!--[if gte mso 9]><xml>
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Peter Dorman <a href="http://econospeak.blogspot.co.uk/2016/12/the-identity-equals-causation-fallacy.html" target="_blank">comments</a> on Mankiew's NYT <a href="http://www.nytimes.com/2016/12/02/upshot/want-to-rev-up-the-economy-dont-worry-about-the-trade-deficit.html?partner=rss&emc=rss&_r=0" target="_blank">piece</a> on the trade
deficit.<span style="mso-spacerun: yes;"> </span>This concerns the extent to
which the balance of trade depends on capital flows and what this implies when thinking
about the consequences for output and employment. </div>
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<br /></div>
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There are a couple of points worth emphasising here: </div>
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<br /></div>
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1. Measures aimed at improving trade performance will have
no impact on the trade balance if capital account flows remain unchanged (also
assuming investment income is unchanged).</div>
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<br /></div>
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2. Such measures do not actually need to change the trade
balance in order to be effective.</div>
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<br /></div>
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The first point is simply an accounting statement, but it helps
highlight some important mechanics.</div>
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<br /></div>
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Net trade flows can only change if capital flows
change.<span style="mso-spacerun: yes;"> </span>So in order to understand how
net trade will respond to trade measures, we have to also understand how
capital flows will respond.<span style="mso-spacerun: yes;"> </span>The miracle
of accounting ensures that every piece of trade will be matched by a financial
flow.<span style="mso-spacerun: yes;"> </span>But it is not only the item of
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<br /></div>
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If it is not, something has to give.<span style="mso-spacerun: yes;"> </span>This is probably the exchange rate and in the
extreme case this would stop the trade item happening by making it no longer
attractive.</div>
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<br /></div>
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Now, measures taken to improve trade performance may have
consequences which impact on the preferences agents have for financial
balances.<span style="mso-spacerun: yes;"> </span>The most obvious possibility
here is again movements in the exchange rate.<span style="mso-spacerun: yes;">
</span>But, in the extreme case, where financial preferences do not respond,
there can be no change in the trade balance.</div>
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<br /></div>
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However, this does not mean that trade measures can have no
effect unless they change balance sheet preferences.<span style="mso-spacerun: yes;"> </span>This brings us to the second point.<span style="mso-spacerun: yes;"> </span>The easiest way to show this is to start with
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<br /></div>
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NX = X -M</div>
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<br /></div>
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and we define the import propensity (m) as imports divided
by GDP (Y)</div>
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<br /></div>
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m = M / Y</div>
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<br /></div>
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An elementary re-arrangement gives:</div>
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<br /></div>
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Y = ( X - NX ) / m</div>
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<br /></div>
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This shows that, if our concern is the impact on output and
employment,<span style="mso-spacerun: yes;"> </span>then trade measures can be
effective without needing to change the trade balance.<span style="mso-spacerun: yes;"> </span>If the trade balance is in fact driven by
inelastic flows on the capital account, measures that increase exports or
reduce the import propensity can still raise output. </div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com7tag:blogger.com,1999:blog-5362801348602268473.post-54852944022613912132016-11-24T05:48:00.000-08:002016-11-24T05:48:35.105-08:00Productivity growth is about what you make, not how much.<!--[if gte mso 9]><xml>
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In his Autumn Statement speech, the UK chancellor Philip Hammond
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Therefore, what Hammond's comment means is that the output
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worker's output does.<span style="mso-spacerun: yes;"> </span>Fixing this comes
not making more of the same thing per day, but from making stuff that is in
higher demand and sells for more.<span style="mso-spacerun: yes;">
</span>Positioning in international trade is a key part of this.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-45146340594878013212016-11-16T01:21:00.001-08:002016-11-16T01:21:22.726-08:00Devaluation and Tariffs<!--[if gte mso 9]><xml>
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Chris Dillow has a <a href="http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/11/tariffs-vs-exchange-rates.html" target="_blank">post</a> comparing devaluation and
tariffs.<span style="mso-spacerun: yes;"> </span>This raises some interesting
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<br /></div>
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First, tariffs raise revenue for the state that levies
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contractionary impact on demand.<span style="mso-spacerun: yes;"> </span>To make
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<br /></div>
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<br /></div>
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This is the key benefit (to the nation that levies them) of
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in the exchange rate) and that of those foreign goods that compete with exports.<span style="mso-spacerun: yes;"> </span>The rise in import prices not only has a direct impact on the general
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<br /></div>
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<br /></div>
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In some cases, this may be the only way that particular nation
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However, nations often respond to a balance of
payments constraint, not by devaluing, but by suppressing domestic demand,
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programme of tariffs may offer an improvement even for those nations that are
on the wrong end of them.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-18763650432994134402016-10-21T07:58:00.000-07:002016-10-21T07:58:31.345-07:00Productivity Growth and Trade: A Model<!--[if gte mso 9]><xml>
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<div class="MsoNormal">
I did a <a href="http://monetaryreflections.blogspot.co.uk/2016/05/the-importance-of-manufacturing.html" target="_blank">post</a> back in May about manufacturing in the UK and its role in productivity growth and
in foreign trade.<span style="mso-spacerun: yes;"> </span>My purpose was to
stress that, for an economy as open as the UK, industry concentration was more about trade than about productivity growth. <span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The fact is that simply securing productivity growth can actually
be detrimental for a country.<span style="mso-spacerun: yes;"> </span>The reasons
for this are not immediately obvious, so I drew up a little model to illustrate
it.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There are two countries: Country A and Country B.<span style="mso-spacerun: yes;"> </span>Each country produces haircuts and one type
of fruit - Country A produces apples and Country B produces bananas.<span style="mso-spacerun: yes;"> </span>Haircuts are not traded internationally;
fruit is.<span style="mso-spacerun: yes;"> </span>So households in each country
consume two types of fruit and domestic haircuts.</div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
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" /></div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Wages are fixed in the currency of each country.<span style="mso-spacerun: yes;"> </span>All prices are set at the same fixed mark-up
to unit labour costs.<span style="mso-spacerun: yes;"> </span>We'll call Country
A's currency the $, and Country B's £.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The elasticity of substitution in demand is the same for each
product and in each country.<span style="mso-spacerun: yes;"> </span>We start by
assuming that in both countries, households spend an equal amount on each of
the three products they consume and that 1/3rd of the workforce is employed in producing
haircuts and 2/3rds in producing fruit.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The £ / $ exchange rate floats to ensure that the value of
exports equals the value of imports for each country. The labour supply is fixed and demand is managed to ensure continual
full employment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So far, each country is identical.<span style="mso-spacerun: yes;"> </span>The difference we want to introduce is to
suppose that there is a 3% per period growth in labour productivity in the
production of bananas.<span style="mso-spacerun: yes;"> </span>There is no
change in labour productivity in the production of apples or haircuts.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The charts below are based on an elasticity of substitution in
demand of 0.75 and are normalised to give opening values of unity.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The first thing to notice is that the banana producing Country
B has GDP growth and Country A does not.<span style="mso-spacerun: yes;">
</span>(GDP is calculated here as a chained volume measure at opening year
prices.) This is hardly surprising.<span style="mso-spacerun: yes;"> </span>The GDP
growth rate is less than the rate of growth in banana productivity, because
there is no change in productivity in haircuts.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
</div>
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" /></div>
<div class="MsoNormal">
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<div class="MsoNormal">
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<div class="MsoNormal">
Rising banana productivity means falling unit labour costs
and falling banana prices in the domestic currency, £.</div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
At the prevailing exchange rate, a fall in the £ banana
price would lead to a drop in the value of exports for Country B, even though
the volume of exports rises, given that the demand elasticity is less than 1.<span style="mso-spacerun: yes;"> </span>The exchange rate therefore has to change
leading to a fall in the value of the £ against the $.<span style="mso-spacerun: yes;"> </span>This means that the $ price of bananas falls
by even more than the £ price.<span style="mso-spacerun: yes;"> </span>It also
means that £ price of apples rises, even though the $ price of apples is
unchanged.</div>
<div class="MsoNormal">
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src="data:image/png;base64,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" 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These further price changes alter trade volumes
until the values of trade flows balance. The chart below shows that this involves a big increase in the banana exports of Country B, whilst there is a slight decline in Country A's apple exports. This is consistent with Thirlwall's Law and what is happening here to GDP.<br />
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" 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The exchange rate movement also means that consumer prices fall by more in Country A than in Country B. This means that real wages (based on a consumption price index - not the GDP deflator) rise more slowly in Country B than in
Country A, notwithstanding that Country B is generating all of the growth in
production.</div>
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/></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In this model, Country A wages rise faster than those in
Country B whenever the elasticity of substitution in demand is less than 1.<span style="mso-spacerun: yes;"> </span>In fact, if the elasticity is less than about
0.61, then real wages in Country B actually fall, because the £ price of apples
rises faster than the £ price of bananas falls.<span style="mso-spacerun: yes;">
</span>This result is somewhat counter-intuitive. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
These elasticity levels are not at all unrealistic for
international trade flows.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As a further point it is worth noting that Country B can
mitigate the reduction in its own real wages by depressing domestic demand.<span style="mso-spacerun: yes;"> </span>This reduces employment and GDP in Country B.<span style="mso-spacerun: yes;"> </span>It raises real wages in Country B, but
reduces them in Country A.<span style="mso-spacerun: yes;"> </span>Imposing
tariffs (whether on exports or on imports) will also raise real wages in
Country B at the expense of those in Country A, but does not involve reduced
employment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The purpose of this post is simply to highlight two points:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. GDP growth is not the same as growth in living standards.
<span style="mso-spacerun: yes;"> </span>A country that has a high proportion of
activity in industries with strong productivity growth is likely to have high
GDP growth.<span style="mso-spacerun: yes;"> </span>But this, in itself, is not
a good reason to concentrate on such industries. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. Elasticities in traded goods are crucial. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, it is not the purpose of this post to suggest that it is a
bad thing to have industries with high potential productivity growth.<span style="mso-spacerun: yes;"> </span>In practice growth in productivity is not mainly
about producing more of the same for given inputs; it is about producing new
and better products.<span style="mso-spacerun: yes;"> </span>This innovation is itself
important in developing and sustaining export demand.<span style="mso-spacerun: yes;"> </span>We cannot separate developments in trade from
what is happening with productivity growth.<span style="mso-spacerun: yes;">
</span>The important point though is that trade is a critical part of the
picture; productivity growth alone tells us very little.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Equation Listing</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
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<div class="MsoNormal">
Consumption of each good in each country is based on a consumption index
and the price relative to a consumption price index.</div>
<div class="MsoNormal">
1. <span style="mso-tab-count: 1;"> </span>C<sub>Aa</sub>
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2. <span style="mso-tab-count: 1;"> </span>C<sub>Ab</sub>
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<div class="MsoNormal">
4. <span style="mso-tab-count: 1;"> </span>C<sub>Ba</sub>
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<div class="MsoNormal">
5. <span style="mso-tab-count: 1;"> </span>C<sub>Bb</sub>
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<div class="MsoNormal">
6. <span style="mso-tab-count: 1;"> </span>C<sub>Bh</sub>
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With the price indices calculated as:</div>
<div class="MsoNormal">
7.<span style="mso-tab-count: 1;"> </span>p<sub>A</sub>
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<div class="MsoNormal">
8.<span style="mso-tab-count: 1;"> </span>p<sub>B</sub>
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<br /></div>
<div class="MsoNormal">
All domestic prices are set at the same mark-up to unit
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<div class="MsoNormal">
9. <span style="mso-tab-count: 1;"> </span>p<sub>£b</sub>
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<div class="MsoNormal">
10. <span style="mso-tab-count: 1;"> </span>p<sub>£h</sub>
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<div class="MsoNormal">
11. <span style="mso-tab-count: 1;"> </span>p<sub>$a</sub>
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<div class="MsoNormal">
12. <span style="mso-tab-count: 1;"> </span>p<sub>$h</sub>
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Import prices reflect the exchange rate.</div>
<div class="MsoNormal">
13. <span style="mso-tab-count: 1;"> </span>p<sub>£a</sub>
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<div class="MsoNormal">
14. <span style="mso-tab-count: 1;"> </span>p<sub>$b</sub>
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The value of exports equals the value of imports.<span style="mso-spacerun: yes;"> </span>(This equation is used to find the market
clearing exchange rate.)</div>
<div class="MsoNormal">
15.<span style="mso-tab-count: 1;"> </span>C<sub>Ab</sub>
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<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Employment is based on consumption and productivity.<span style="mso-spacerun: yes;"> </span>(In the basic scenario described, the
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<div class="MsoNormal">
16. <span style="mso-tab-count: 1;"> </span>L<sub>B</sub>
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<div class="MsoNormal">
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<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Variables</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
C<sub>Xy</sub><span style="mso-tab-count: 1;"> </span>Consumption
of y in country X</div>
<div class="MsoNormal">
C<sub>X</sub><span style="mso-tab-count: 1;"> </span>Consumption
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<div class="MsoNormal">
p<sub>zy</sub><span style="mso-tab-count: 1;"> </span>Price
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<div class="MsoNormal">
p<sub>X</sub><span style="mso-tab-count: 1;"> </span>Price
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w<sub>X</sub><span style="mso-tab-count: 1;"> </span>Nominal
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<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">σ</span><sub>y<span style="mso-tab-count: 1;"> </span></sub>Labour
productivity in production of y</div>
<div class="MsoNormal">
L<sub>X</sub><span style="mso-tab-count: 1;"> </span>Employment
in country X</div>
<div class="MsoNormal">
e<span style="mso-tab-count: 1;"> </span>Exchange
rate ( £ per $ )</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">σ is given the same value for each good, in the first period.</span></div>
</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com9tag:blogger.com,1999:blog-5362801348602268473.post-78549298992851791912016-10-18T08:00:00.000-07:002016-10-18T08:00:41.944-07:00Wealth Concentration and Loanable Funds<!--[if gte mso 9]><xml>
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Jo Michell has an interesting <a href="https://criticalfinance.org/2016/10/14/what-is-the-loanable-funds-theory/" target="_blank">post</a> on loanable funds.<span style="mso-spacerun: yes;"> </span>This was prompted by the question of whether
wealth concentration has led to rising asset prices and falling yields.<span style="mso-spacerun: yes;"> </span>Whilst sharing Jo's views in many respects,
my own analysis here is slightly different, so I thought it worth setting out.</div>
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<br /></div>
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First of all, I would agree that increasing wealth
concentration is likely to increase the propensity to save out of income.<span style="mso-spacerun: yes;"> </span>However, this in itself is not enough to change
interest rates.</div>
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<br /></div>
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The diagram below is the standard model of loanable funds (borrowed
from Jo, and in turn from Nick Rowe).<span style="mso-spacerun: yes;">
</span>The idea here is that if there is an increase in the desired quantity of
saving at any given interest rate, this is represented by a rightward shift in
the Sd curve.<span style="mso-spacerun: yes;"> </span>This leads to a fall in the
equilibrium interest rate (even if the Id curve is vertical).</div>
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<br /></div>
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<img alt="lf" class="alignnone size-full wp-image-729" src="https://crimfi.files.wordpress.com/2016/10/lf.jpg?w=620" /></div>
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<br /></div>
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However, an increased propensity to save is not the same
thing as a desire to save an increased quantity.<span style="mso-spacerun: yes;"> </span>In fact, an increased desire to save leads to
lower income.<span style="mso-spacerun: yes;"> </span>The actual quantity people
end up wanting to save is unchanged; it simply represents a higher proportion
of income.<span style="mso-spacerun: yes;"> This is the paradox</span> of thrift. So there is no movement in
the Sd curve and no change in the (partial) equilibrium interest rate.</div>
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<br /></div>
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There may be temporary movements, if people are mistaken in
what they expect will happen.<span style="mso-spacerun: yes;"> </span>If one
person tries to save more without realising others are also doing so, then they
may overestimate their own income and start to bid up asset prices.<span style="mso-spacerun: yes;"> </span>But, assuming they eventually cotton on to
what is happening, this will eventually reverse.</div>
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<br /></div>
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Having said all this, I would still say that increased
wealth concentration has contributed to falling yields.<span style="mso-spacerun: yes;"> </span>The reasons for saying so are as follows.</div>
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<br /></div>
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The argument above is based on what happens in a monetary
economy.<span style="mso-spacerun: yes;"> </span>In looking at how things pan
out in a monetary economy, we can't get very far without asking how monetary
policy is framed.<span style="mso-spacerun: yes;"> </span>For example, if monetary policy
takes the form of simply fixing or targeting a particular interest rate, then almost by definition changes in savings propensity are not going to change that rate.</div>
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<br /></div>
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However, for our purposes here we need to recognise that
current monetary policy takes the form of inflation targeting.<span style="mso-spacerun: yes;"> </span>This means that the central bank responds to perceived
deflationary pressures by reducing the policy rate.<span style="mso-spacerun: yes;"> </span>So an increased propensity to save does
indeed lead to lower interest rates, but it does so because it depresses demand
and because the central bank reacts to that.</div>
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<br /></div>
<div class="MsoNormal">
One interpretation here is to suppose that implementation of
monetary policy brings the economy back to its original level of demand, at whatever interest rate that requires.<span style="mso-spacerun: yes;"> </span>Thus we can
go back to our loanable funds diagram and say that the Sd curve has indeed
shifted to the right, once we have taken into account the full operation of
monetary policy.</div>
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<br /></div>
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This is one way of looking at it and I'm all in favour of
looking at things in different ways, for the additional insight it
provides.<span style="mso-spacerun: yes;"> </span>However, I find it a little
problematic.<span style="mso-spacerun: yes;"> </span>We can easily conceive of a
situation where there is an increased propensity to save but where reductions in
interest rates are ineffective in restoring demand. <span style="mso-spacerun: yes;"> </span>In this scenario, there is no solution
compatible with the unchanged output interpretation and it fails as an
explanation of interest rates.</div>
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<br /></div>
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Even if we think that interest rate manipulation can bring
output back to its original level, there is no general reason to suppose that
the terminal interest rate of this process is independent of the path taken to
get there.<span style="mso-spacerun: yes;"> </span>(In most models it is
independent, but that doesn't mean it is in reality.)<span style="mso-spacerun: yes;"> </span>There would then be no meaningful <i style="mso-bidi-font-style: normal;">ceteris paribus</i> solution to the loanable
funds model. </div>
<br />
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</div>
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<br /></div>
There is another important way in which wealth concentration
has contributed to falling yields, one that was particularly important in the
run up to the crisis.<span style="mso-spacerun: yes;"> </span>This is not to do
with increased propensity to save, but rather with portfolio preference.<span style="mso-spacerun: yes;"> </span>(We might think of portfolio preference as a
more general form of liquidity preference, when we are considering a range of
assets rather than simply bonds and money.)<br />
<br />
Wealth concentration makes investors more concerned about
large exposures to single name risk.<span style="mso-spacerun: yes;">
</span>Pre-crisis, managers of large cash pools already holding sizeable unsecured
bank deposits increasingly sought alternative low risk short term investments.<span style="mso-spacerun: yes;"> </span>This created a strong demand for traded high
quality assets which could be used as collateral for short term secured
instruments.<span style="mso-spacerun: yes;"> </span>This in turn led to
increased demand for the assets that could used to create such collateral, such
as securitisable mortgages.<span style="mso-spacerun: yes;"> </span>The effect
of this demand pressure was to drive down the yields on such assets relative to
policy rates and rates on unsecured bank deposits.
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In short, wealth concentration is certainly an important
part of the picture of what has happened to financial asset yields.<span style="mso-spacerun: yes;"> </span>But whilst the loanable funds model might
provide some kind of insight it is, in my view, an insufficient framework for
understanding the mechanisms at play.
</div>
<br />
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com5tag:blogger.com,1999:blog-5362801348602268473.post-7350014240837830122016-10-16T01:42:00.000-07:002016-10-16T01:42:00.775-07:00Why Do We Care About Exports?<!--[if gte mso 9]><xml>
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Since my last post on the impact of sterling depreciation on
different industry sectors, there have been a number of other interesting
comments on what it means for UK exports.<span style="mso-spacerun: yes;">
</span>Some of this is informed, but sometimes the issue of why exports matter
is a little confusing.</div>
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In my opinion, trade performance is one of the most
important issues for the UK and has been for a long time.<span style="mso-spacerun: yes;"> </span>Securing long term growth in living standards
in the UK depends on building and maintaining its ability to export (and in
some areas, resist import penetration). </div>
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The reason we care about this is not because we care about
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In simple terms this suggests that a boost to exports from a
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However, this does mean that it is always better to have a
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exporters' profitability, which may discourage investment and growth in those
industries restriction future capacity.<span style="mso-spacerun: yes;">
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easily wipe out any benefits gained from the current favourable terms of trade.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com7tag:blogger.com,1999:blog-5362801348602268473.post-62749591170051649312016-10-06T01:45:00.000-07:002016-10-06T01:45:27.948-07:00Brexit and Industry Sectors<!--[if gte mso 9]><xml>
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I was at a talk yesterday, where the speaker made the
observation that, amongst those that had spoken out in favour of Brexit, there
were quite a high number of UK engineering firms.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
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This is interesting, because it reveals something about the
issues that the UK faces with Brexit and how any significant change tends to
have winners and losers.<span style="mso-spacerun: yes;"> </span>In fact, even
if Brexit turns out to be detrimental to the UK as a whole, many UK manufacturing
companies may be better off.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This comes down to the differences in trade and trade barriers
between industry types.<span style="mso-spacerun: yes;"> </span>One of the key
concerns that UK trade economists have over Brexit is that it will have
different impact on trade in services and in goods.<span style="mso-spacerun: yes;"> </span>Outside of a single market, trade in goods
can be effectively supported through trade agreements.<span style="mso-spacerun: yes;"> </span>There may be additional costs to trade in the
form of tariffs, or through increased bureaucracy, but these may not be so great
when put in the context of potential exchange rate movements.</div>
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<br /></div>
<div class="MsoNormal">
Trade in services, however, is much more susceptible to non-tariff
barriers, particularly if tied in with restrictions on the free movement of
labour.<span style="mso-spacerun: yes;"> </span>This matters particularly to the
UK which has relied on strong export performance in services to maintain
favourable terms of trade.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So if Brexit turns out to be detrimental to the UK's export
capability, it is likely to hit service exports much more than export of
goods.<span style="mso-spacerun: yes;"> </span>Why might this be good news for
exporters of goods? </div>
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<br /></div>
<div class="MsoNormal">
Put simply, this is because exporters of goods and exporters
of services are competitors as sellers of foreign exchange.<span style="mso-spacerun: yes;"> </span>And if an external event hurts your
competitors more than it hurts you than you can end up better off.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here, this is to do with what happens to the exchange
rate.<span style="mso-spacerun: yes;"> </span>If the UK's general export
capability is damaged (or if people simply expect this), then this will lead to
a depreciation of the exchange rate, (as appears to be already happening).<span style="mso-spacerun: yes;"> </span>However the depreciation itself helps
exporters.<span style="mso-spacerun: yes;"> </span>It allows exporters to sell
more and raise their domestic denominated prices thereby raising (domestic
denominated) profit.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The depreciation offsets to some extent the damage to export
capability.<span style="mso-spacerun: yes;"> </span>But, if you are in one of
the industries that is least affected by the external shock, then you have all
the benefits of the depreciation with little of the downside.<span style="mso-spacerun: yes;"> </span>This is the position potentially facing UK
manufactures.<span style="mso-spacerun: yes;"> </span>A hit to UK service
exporters could boost manufacturing profits, even if it's bad news for the UK overall.</div>
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<br /></div>
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Of course, it is no clearer now what Brexit will entail,
than it was before referendum result.<span style="mso-spacerun: yes;">
</span>Only time will tell what sort of trading status the UK is able to
negotiate and what this will mean for its terms of trade.<span style="mso-spacerun: yes;"> </span>Who the eventual winners and losers are is
yet to be decided.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-90157932647662804752016-07-06T09:56:00.002-07:002016-07-06T09:56:47.119-07:00An SFC Analysis of a Shock to Export Capability<!--[if gte mso 9]><xml>
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<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The UK's
decision to quit the EU has left a lot of uncertainty over its future trading
position.<span style="mso-spacerun: yes;"> </span>It will probably be a long
time before it becomes clear what kind of arrangements can be
negotiated, but the concern is that the UK could suffer damage to
export capability, with <span style="font-family: "times new roman" , "serif";">little reduction in its<span style="font-family: "times new roman" , "serif";"> </span></span>susceptibility to import penetration.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">One immediate
consequence of these concerns has been a sharp fall in sterling.<span style="mso-spacerun: yes;"> </span>In principle, this should be good news for UK
export capability, and there was a case to be made that sterling was overvalued
before the referendum.<span style="mso-spacerun: yes;"> </span>However, if this
indeed reflects a weakened trade position, then assessing the overall impact is
more tricky. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">As such,
I thought it would be interesting to use a stock-flow consistent model to look
at how a shock to export capability and consequent exchange rate weakening might
impact on overall activity.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The model
I have used here is essentially the same as one described in an earlier
<a href="http://monetaryreflections.blogspot.co.uk/2015/12/a-portfolio-balance-model-of-exchange.html" target="_blank">post</a>.<span style="mso-spacerun: yes;"> </span>It is purely conceptual - no
attempt has been made to calibrate it to the UK.<span style="mso-spacerun: yes;"> </span>The main difference compared to the earlier
version is that I have expanded on the way inflation is determined. <span style="mso-spacerun: yes;"></span>The mechanism here
is based on real wage targeting and follows that used in <a href="http://www.palgrave.com/us/book/9780230301849" target="_blank">Godley & Lavoie</a> (p
302), incorporating adaptive inflation expectations.<span style="mso-spacerun: yes;"> </span>Pricing is a straightforward mark-up to unit labour
costs.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Otherwise,
the only real departure from what might be found in Godley and Lavoie is the
use of forward looking expectations for the exchange rate.<span style="mso-spacerun: yes;"> </span>This is useful here, where we want to look at
the impact of a change in expectations of future trade prospects.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">As usual,
I have provided a full equation listing at the end of the post.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The
graphs below show the effect on selected variables of a 5% fall in the base
level of exports (i.e. before taking account of changes due to relative price).</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"> <img alt="" 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" 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<br /></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">One of
the first things to note is that although this leads to a fall in actual real exports,
there is a much greater fall in real imports.<span style="mso-spacerun: yes;">
</span>This is due to the fall in the real exchange rate.<span style="mso-spacerun: yes;"> </span>Exports become cheaper which mitigates the
impact of the change in the base level of demand.<span style="mso-spacerun: yes;"> </span>However, this worsening in the terms of trade
means that the level of foreign earnings from exporting has fallen
dramatically.<span style="mso-spacerun: yes;"> </span>The amount of imports this
buys has been significantly reduced.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">In
itself, the fact that import volumes have fallen by more than export volumes
might be expected to provide a boost to domestic production.<span style="mso-spacerun: yes;"> </span>However, the worsening of the terms of trade reduces
the real value of domestic income, specifically when we measure by reference to
the consumer price deflator rather than the GDP deflator.<span style="mso-spacerun: yes;"> </span>Consider what happens to the real wage as
shown in the graph.<span style="mso-spacerun: yes;"> </span>The nominal wage deflated
by the price of domestic output is a constant, because of the mark-up
pricing.<span style="mso-spacerun: yes;"> </span>But, because consumption also
includes imports, when the real wage is deflated by the consumer price index it
closely reflects changes in the real exchange rate.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">This
erosion in the value of real income reduces consumer expenditure and this is
enough to more than outweigh the boost to output from reduced imports.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Although
the scale of this depends on the parameters, the direction of change is a
consequence of the stock-flow structure.<span style="mso-spacerun: yes;">
</span>In a model like this, GDP tends towards a level which achieves a steady
state level of government debt.<span style="mso-spacerun: yes;"> </span>This is
largely determined by the fiscal stance.<span style="mso-spacerun: yes;">
</span>However, inflation will have an impact because it erodes the real value
of the government debt.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The
decline in the real exchange rate gives an inflationary impulse.<span style="mso-spacerun: yes;"> </span>Eventually, this settles down to a higher
level of inflation giving a reduced real return on domestic assets compared
with overseas assets.<span style="mso-spacerun: yes;"> </span>This is necessary
because, when valued in the same currency, </span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">the fall in the real exchange rate has made </span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">the supply of domestic assets <span style="font-family: "times new roman" , "serif";">lower relative </span>to the supply of foreign assets.<span style="mso-spacerun: yes;"> (It is, of course, possible that seperate factors might al<span style="font-family: "times new roman" , "serif";">so impact on the relative demand for these assets. This is not considere<span style="font-family: "times new roman" , "serif";">d here, but is obviously relevant in the context of <span style="font-family: "times new roman" , "serif";">the fallout from the Brexit vote.)</span></span></span></span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The
higher level of inflation can be seen in graph.<span style="mso-spacerun: yes;">
</span>This erodes government debt, requiring the state to run a slightly
higher deficit to compensate.<span style="mso-spacerun: yes;"> </span>This
higher deficit implies lower tax revenues, which in turn implies a lower level
of GDP.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Equation Listing</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Equations
(1) to (15) are as described in the previous model.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(1)<span style="mso-tab-count: 1;"> </span>y =<span style="mso-spacerun: yes;">
</span>d + g + x</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(2)<span style="mso-tab-count: 1;"> </span>d = ( C - m . p<sub>f</sub> / e ) / p</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(3)<span style="mso-tab-count: 1;"> </span>C = α<sub>1</sub> . YD<span style="mso-spacerun: yes;"> </span>+ α<sub>2</sub> . ( Bd<sub>-1</sub> + Fd<sub>-1</sub>
/ e )</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(4)<span style="mso-tab-count: 1;"> </span>YD = y . p - T + r<sub>-1</sub> . BD<sub>-1</sub>
+ rf . Fd<sub>-1</sub> / e</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(5)<span style="mso-tab-count: 1;"> </span>T = τ .<span style="mso-spacerun: yes;">
</span>( y . p + r<sub>-1</sub> . Bd<sub>-1</sub> + rf . Fd<sub>-1</sub> / e )</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(6)<span style="mso-tab-count: 1;"> </span>m = d . µ . ( e . p / pf )<sup>σ1</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(7)<span style="mso-tab-count: 1;"> </span>x = x<sub>0</sub> . ( e . p / pf )<sup>σ2</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(8)<span style="mso-tab-count: 1;"> </span>V = YD - C + Bd<sub>-1</sub> + Fd<sub>-1</sub>
/ e</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(9)<span style="mso-tab-count: 1;"> </span>Fd = e . λ<sub>1</sub> . V. ( rrf / r )<sup>κ1</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(10)<span style="mso-tab-count: 1;"> </span>Bw = λ<sub>2</sub> . Vf / e . ( rrd / rf )<sup>κ2</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(11)<span style="mso-tab-count: 1;"> </span>B = B<sub>-1</sub> . ( 1 +r<sub>-1</sub> )
+ g . p - T</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(12)<span style="mso-tab-count: 1;"> </span>Bd = V - Fd / e</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(13)<span style="mso-tab-count: 1;"> </span>Bw = B - Bd</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(14)<span style="mso-tab-count: 1;"> </span>rrd = ( 1 + rd ) . E[ e<sub>+1</sub> ] / e
- 1</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(15)<span style="mso-tab-count: 1;"> </span>rrf = ( 1 + rf ) . e / E[ e<sub>+1</sub> ]
- 1</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Employment
is proportional to output.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(16)<span style="mso-tab-count: 1;"> </span>n = </span><span style="font-size: 12.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">φ</span><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"> . y</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The target
real wage is based on the level of employment.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(17)<span style="mso-tab-count: 1;"> </span>wrt = wrt<sub>0</sub> . ( n / n<sub>0</sub>
)<sup>δ</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Nominal
wage adjustment is based on inflation expectations and the gap between the
target real wage and the previous actual real wage.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(18)<span style="mso-tab-count: 1;"> </span>w = w<sub>-1</sub> . E[π] . ( wrt . pc<sub>-1</sub>
<span style="mso-spacerun: yes;"> </span>/ w<sub>-1</sub> )<sup>ψ</sup></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Prices
are a straight mark-up to unit labour costs.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(19)<span style="mso-tab-count: 1;"> </span>p = β . w . n / y</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Consumer
prices are approximated as the deflator between nominal consumer spending and
an aggregate volume measure.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(20)<span style="mso-tab-count: 1;"> </span>pc = C / ( d + m )</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Inflation
expectations are adaptive.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(21)<span style="mso-tab-count: 1;"> </span>E[π] = E[π]<sub>-1</sub> + ε . ( π<sub>-1</sub>
- E[π]<sub>-1</sub> )</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Where
inflation is taken as the change in consumer prices (expressed as 1 plus the
change).</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">(22)<span style="mso-tab-count: 1;"> </span>π = pc / pc<sub>-1</sub></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Variables</span></b><span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;"></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">The
variables are listed below.<span style="mso-spacerun: yes;"> </span>Uppercase
variables denote nominal values.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 17.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">B</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Domestic
bonds</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 1;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Bd</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Domestic
bonds held by domestic investors</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 2;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Bw</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Domestic
bonds held by overseas investors</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 3;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">d</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Domestic
expenditure by the domestic private sector</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 4;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">e</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Exchange
rate (units of foreign currency per unit of domestic currency)</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 5;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Fd</span></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Overseas
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<tr style="height: 17.0pt; mso-yfti-irow: 6;">
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<tr style="height: 17.0pt; mso-yfti-irow: 7;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">m</span></div>
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<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Real
imports</span></div>
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<tr style="height: 17.0pt; mso-yfti-irow: 8;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">n</span></div>
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<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Employment</span></div>
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</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 9;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">n<sub>0</sub></span></div>
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<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Base
level of employment</span></div>
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<tr style="height: 17.0pt; mso-yfti-irow: 10;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">p</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Price
of domestic output</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 11;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">pc</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Consumer
price deflator</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 12;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">pf</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Price
of foreign output</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 13;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">r</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Interest
rate on domestic bonds</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 14;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">rf</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Interest
rate on foreign bonds</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 15;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">rrd</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Expected
return to foreign investors on domestic bonds</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 16;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">rrf</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Expected
return to domestic investors on foreign bonds</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 17;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">T</span></div>
</td>
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Taxes</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 18;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">V</span></div>
</td>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Net
financial wealth of domestic private sector</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 19;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Vf</span></div>
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<tr style="height: 17.0pt; mso-yfti-irow: 20;">
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</td>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Nominal
wage</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 21;">
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">wrt</span></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Target
real wage</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 22;">
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">wrt<sub>0</sub></span></div>
</td>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Base
level of target real wage</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 23;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">x</span></div>
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exports</span></div>
</td>
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<tr style="height: 17.0pt; mso-yfti-irow: 24;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">x<sub>0</sub></span></div>
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Base
level of real exports</span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-yfti-irow: 25;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
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<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Real
output</span></div>
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<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
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<tr style="height: 17.0pt; mso-yfti-irow: 27; mso-yfti-lastrow: yes;">
<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
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<td style="height: 17.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 340.15pt;" width="454"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "times new roman" , "serif"; font-size: 12.0pt;">Consumer
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variables (Vf, x<sub>0 </sub>and rf) are taken as exogenous in accordance with
the "small" economy assumption. E[ ] denotes the expected value of a variable. Expected values of exchange rates are set equal to actual outcomes, except for the period of the shock.</span></div>
<div class="MsoNormal">
<br /></div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-38168718435965587152016-06-09T02:32:00.000-07:002016-06-09T02:32:03.115-07:00Helicopter Money and the Denial of the Importance of Sound Fiscal Policy<!--[if gte mso 9]><xml>
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A recent <a href="http://voxeu.org/article/helicopter-money-illusion-free-lunch" target="_blank">article</a> on VOX has prompted more commentary on Helicopter
Money.</div>
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<br /></div>
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In principle, HM
should appeal to anyone who believes that more stimulus is needed.<span style="mso-spacerun: yes;"> </span>To those of a post-Keynesian mindset, HM is
just expansionary fiscal policy; the fact that it is financed by money rather
than bonds being of secondary importance.<span style="mso-spacerun: yes;">
</span>But those that believe fiscal policy is impotent and it all comes down
to monetary policy can view HM as being another monetary tool.</div>
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<br /></div>
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Given that it should appeal to both points of view, it's perhaps
odd that it should cause so much argument.<span style="mso-spacerun: yes;">
</span>Yet, as someone whose perspective tends to fall in the former camp, I
find myself strangely irritated by the approach of many in the latter.<span style="mso-spacerun: yes;"> </span>Where additional stimulus is needed, I think
debt-financed fiscal expansion is best, but I'd still see HM as a pretty good
substitute.<span style="mso-spacerun: yes;"> </span>So what's the problem?</div>
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<br /></div>
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I think the issue is that portraying HM as monetary policy
looks to me like a pretence and worse, it looks like a rather desperate attempt
to defend the idea that monetary policy is sufficient to regulate demand in the
economy, regardless of what fiscal policy is doing.<span style="mso-spacerun: yes;"> </span>In my opinion, if we think we need HM, that <span style="mso-spacerun: yes;"> </span>is an indication that we
have got fiscal policy wrong.<span style="mso-spacerun: yes;"> </span>Furthermore,
it is an indication that when we get fiscal policy wrong, regular monetary
policy is not capable of providing anything other than a temporary fix.<span style="mso-spacerun: yes;"> </span>Monetary policy enthusiasts like to think of the
zero lower bound as a special case where regular monetary policy might be
insufficient.<span style="mso-spacerun: yes;"> </span>However, they fail to
acknowledge that if the fiscal stance is misjudged, attempts by monetary policy
to compensate will inevitably end up at the zero lower bound anyway (see <a href="http://monetaryreflections.blogspot.co.uk/2016/04/why-inter-temporal-government-budget.html" target="_blank">here</a>).</div>
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<br /></div>
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So what I don't like about this debate is the way that it is
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tool for day-to-day management, but it is critical that it is used with a view to
its impact on demand, not to managing the public debt.<span style="mso-spacerun: yes;"> </span>If this is not the case, monetary policy is
stuffed.<span style="mso-spacerun: yes;"> </span>It might provide a temporary
fix, but only through stoking private sector debt bubbles.<span style="mso-spacerun: yes;"> </span>The notion that HM may now be beneficial
should be a recognition of this, not an attempt to pretend that monetary
policy is still what it's all about.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com8tag:blogger.com,1999:blog-5362801348602268473.post-9703913775379633362016-05-22T06:43:00.000-07:002016-05-22T06:43:22.832-07:00The Importance of Manufacturing: Productivity Growth or Trade?<!--[if gte mso 9]><xml>
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In a recent <a href="http://www.theguardian.com/commentisfree/2016/may/18/making-things-matter-britain-forgot-manufacturing-brexit" target="_blank">article</a>, Ha-Joon Chang highlights the decline of
manufacturing as a source of stagnating living standards in the UK.<span style="mso-spacerun: yes;"> </span>I would agree that Britain's manufacturing
decline is a cause for concern, but what interested me in the article was the discussion
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The basic argument here is: 1) there is greater scope for productivity
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productivity growth; 3) the higher a country's overall productivity growth, the
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To help see why, imagine that you were about to choose your
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- an area with little scope for productivity growth.<span style="mso-spacerun: yes;"> </span>Now, obviously, there are lots of
considerations here.<span style="mso-spacerun: yes;"> </span>However, the
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What in fact is likely to happen is that, over time, TVs
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and the hairdresser.<span style="mso-spacerun: yes;"> </span>Exactly how much
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In a world with significant global trade, the same point
applies to whole economies.<span style="mso-spacerun: yes;"> </span>Productivity
gains in one country are to the benefit of all countries, even those which are
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<br /></div>
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Now, this does not mean that the UK's decline in
manufacturing does not matter.<span style="mso-spacerun: yes;"> </span>It does
matter, but the point is that it matters as much because of the role of
manufacturing in providing exports and import substitutes as it does in
providing productivity growth.<span style="mso-spacerun: yes;"> </span>To
benefit from global productivity growth, a country has to be well positioned in
traded markets.<span style="mso-spacerun: yes;"> </span>Cutting hair is a useful
activity, but has limited export potential.<span style="mso-spacerun: yes;">
</span>Of course some services can act as exports and, in principle, it is
possible for a country which exports the right services to see substantial
growth in living standards without any material domestic productivity
growth.<span style="mso-spacerun: yes;"> </span>But this is probably not an
option for the UK.</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com10tag:blogger.com,1999:blog-5362801348602268473.post-18798489425105722312016-04-11T07:56:00.002-07:002016-04-11T07:56:42.012-07:00Why the Inter-temporal Government Budget Constraint Cuts Both Ways <!--[if gte mso 9]><xml>
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<div class="MsoNormal">
There are some heterodox economists who get very worked up over
the notion of the inter-temporal government budget constraint (IGBC).<span style="mso-spacerun: yes;"> </span>In my opinion, this is unjustified.<span style="mso-spacerun: yes;"> </span>For a couple of reasons.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the first place, where the constraint does hold, it is in
itself little more than an accounting identity and not a limit on policy as we normally
understand it.<span style="mso-spacerun: yes;"> </span>If there is any kind of
non-accounting constraint, it arises for other reasons such as resource
constraints or the imposition of other objectives.<span style="mso-spacerun: yes;"> </span>Secondly (and I rarely see this mentioned)
the IGBC sometimes imposes a strong imperative for the use of active fiscal
policy.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The IGBC says that the real discounted value of future
primary surpluses is equal to the real value of current outstanding debt (where
discounting takes place at the real effective rate of interest on government
debt).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With regard to the first point, we can easily see that this
condition will hold in a typical SFC model<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "calibri" , "sans-serif"; font-size: 11.0pt; line-height: 115%;">[1]</span></span></span></span></a>.<span style="mso-spacerun: yes;"> </span>Such models settle down into a steady state where
the real value of debt remains constant, with a primary surplus exactly
offsetting the interest charge on outstanding debt.<span style="mso-spacerun: yes;"> </span>This is a position which meets the IGBC, so the
IGBC must hold for each preceding period as well.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the typical SFC model, the policy instruments are the
level of real government expenditure, the rate of tax and the nominal rate of
interest.<span style="mso-spacerun: yes;"> </span>The IGBC does not itself limit
the choice of these variables.<span style="mso-spacerun: yes;"> </span>This is
because the models allow for the level of real output and/or the rate of
inflation to be determined, with the mix depending on what is assumed about
Phillips curve relationships.<span style="mso-spacerun: yes;"> </span>Given the policy
variables, both of these are relevant for the IGBC.<span style="mso-spacerun: yes;"> </span>The level of output determines the tax take
and hence the level of primary surpluses.<span style="mso-spacerun: yes;">
</span>The level of inflation impacts on the real discount rate.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The upshot of this is that all the IGBC does in this type of
model is limit the possible sets of solutions for output and inflation.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The assumptions of different types of model may combine to
place more of a constraint on policy.<span style="mso-spacerun: yes;">
</span>For a start, if taxes are assumed to be lump sum, then there is no scope
for primary surpluses to be determined endogenously.<span style="mso-spacerun: yes;"> </span>Even without lump sum taxes, the assumption
that real output is supply side determined in the long run (a common, if questionable,
assumption) will limit the endogeneity of the tax take.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Additionally,
if the model assumptions incorporate a unique natural rate of interest, then it
may be that the discount rate used for the IGBC must also be tightly
constrained (although this does depend on what is assumed about how monetary
policy is conducted).<span style="mso-spacerun: yes;"> </span>A typical DSGE
model will tend to incorporate these sorts of assumptions and will therefore
impose a greater constraint on fiscal policy.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, this constraint cuts both ways.<span style="mso-spacerun: yes;"> </span>The usual message is to say that, given the exogenous
output level and natural rate of interest, there is no scope for increased
government expenditure now without requiring correspondingly higher taxes
later.<span style="mso-spacerun: yes;"> </span>But this is not in fact true in
all circumstances and, in some cases, expansionary fiscal policy is exactly
what is required.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Specifically, we can consider what happens if there is a
permanent fall in the natural rate of interest (or at least a fall that
everyone expects to be permanent), something that in Keynesian terms we might
interpret as an increased propensity to save.<span style="mso-spacerun: yes;">
</span>The DSGE response required of the central bank is a reduction in actual
interest rates in an attempt to bring these in line with the lower natural
rate.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This has consequences within the IGBC.<span style="mso-spacerun: yes;"> </span>As the current level of debt is given, then a
reduction in the long-term discount rate requires a reduction in future real primary
surpluses.<span style="mso-spacerun: yes;"> </span>If we assume that long-term <span style="mso-spacerun: yes;"> </span>surpluses are to remain the same, then what is
required is a short-term period of expansionary fiscal policy.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The IGBC plus the other assumptions of DSGE dictate that
something<span style="mso-spacerun: yes;"> </span>like this is required.<span style="mso-spacerun: yes;"> </span>Monetary policy alone is inadequate.<span style="mso-spacerun: yes;"> </span>This raises the question of what happens if
the government declines to respond and instead decides to pursue a policy of
austerity.<span style="mso-spacerun: yes;"> </span>In fact, the only solution in
the model <a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "calibri" , "sans-serif"; font-size: 11.0pt; line-height: 115%;">[2]</span></span></span></span></a>
involves a period of deflation with the nominal interest rate hitting the zero
lower bound.<span style="mso-spacerun: yes;"> </span>This gives a period of higher
real interest rates which increase the real value of outstanding government
debt until it is equal to the future surpluses discounted at the new lower
rate.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
New Keynesian economists will generally recognise the need
for fiscal policy when monetary policy is constrained by the zero lower
bound.<span style="mso-spacerun: yes;"> </span>They are usually only thinking of
scenarios where there are temporary drops in the natural rate of interest that
appears in their models.<span style="mso-spacerun: yes;"> </span>But there are
other possibilities, such as a permanent fall in the natural rate, that
monetary policy can never deal with alone even unconstrained by the lower
bound.<span style="mso-spacerun: yes;"> </span>These situations require a fiscal
policy response and the IGBC shows us why.</div>
<div style="mso-element: footnote-list;">
<br clear="all" />
<hr align="left" size="1" width="33%" />
<div id="ftn1" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "calibri" , "sans-serif"; font-size: 10.0pt; line-height: 115%;">[1]</span></span></span></span></a>
Not necessarily in growth models which may be dynamically inefficient.</div>
</div>
<div id="ftn2" style="mso-element: footnote;">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?blogID=5362801348602268473#_ftnref2" name="_ftn2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "calibri" , "sans-serif"; font-size: 10.0pt; line-height: 115%;">[2]</span></span></span></span></a>
That I can see, at any rate, but I'd be interested if anyone knows differently.</div>
</div>
</div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com0tag:blogger.com,1999:blog-5362801348602268473.post-66832953036829509912016-01-08T09:43:00.000-08:002016-01-09T02:11:20.916-08:00Sticky Prices, Unexpected Inflation and Ricardian Equivalence<!--[if gte mso 9]><xml>
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<br />
<div class="MsoNormal">
An interesting point came up in my recent discussion with
Stephen Williamson (referred to in my last <a href="http://monetaryreflections.blogspot.co.uk/2015/12/fiscal-policy-in-neo-fisherite-versions.html" target="_blank">post</a>, but there's no need to read
that to understand what I'm going to say here.)<span style="mso-spacerun: yes;">
</span>It is to do with the interpretation of Ricardian Equivalence, when there
are unexpected policy changes.<span style="mso-spacerun: yes;"> </span>I
actually thought the point was obvious, but from Williamson's response I am
left thinking that it's either not obvious or I'm wrong.<span style="mso-spacerun: yes;"> </span>If anyone wishes to enlighten me either way,
I'd be grateful.
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
To look at this, I need to make some of the standard
assumptions for Ricardian Equivalence to apply, so I'm going to assume homogenous
households with infinite horizons and no issues like liquidity constraints.<span style="mso-spacerun: yes;"> </span>Under this assumption, the long-run government
budget constraint is binding.<span style="mso-spacerun: yes;"> </span>This says
that the present value of taxes cannot be less than the value of current debt
plus the present value of government spending.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The usual way to interpret this is to suppose that any
change in tax now must be offset by a change in tax at some future time.<span style="mso-spacerun: yes;"> </span>So, for example, if there is a one-off tax
reduction today, then this will need to be financed by issuing debt.<span style="mso-spacerun: yes;"> </span>That additional debt, plus the interest, must
be repaid at some point and this requires future taxes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This analysis is usually set out in real (non-monetary)
terms, with bonds paying a real rate of interest.<span style="mso-spacerun: yes;">
</span>In this case, there is no way other than a future tax increase for the
government budget constraint to be met.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, in reality, public debt is generally issued in
nominal terms, paying a nominal rate of interest.<span style="mso-spacerun: yes;"> </span>This means that the actual rate of return
will vary from the expected rate of return if there is unexpected
inflation.<span style="mso-spacerun: yes;"> </span>What matters for the
government's budget constraint is the <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">actual</i></b> rate of return.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So, consider a case where the government makes an unexpected
tax cut.<span style="mso-spacerun: yes;"> </span>One possibility we have to
consider is that this will lead to a higher inflation than was expected before
the tax cut was known about.<span style="mso-spacerun: yes;"> </span>The result
would be that the actual rate of return on outstanding government debt is lower
than previously expected.<span style="mso-spacerun: yes;"> </span>This
represents a kind of unexpected inflation tax on bondholders, which must be
factored into the government budget constraint.<span style="mso-spacerun: yes;">
</span>The need for future taxes is correspondingly lower.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In a model with perfectly flexible prices, we might have a
position where an immediate jump in the price level produces an inflation tax
that completely offsets the impact of the tax reduction.<span style="mso-spacerun: yes;"> </span>In this case, the tax reduction would have no
impact, simply because it would make no net difference to households' real position.<span style="mso-spacerun: yes;"> </span>The Ricardian Equivalence result holds,
albeit somewhat trivially.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With sticky prices, it's a different matter.<span style="mso-spacerun: yes;"> </span>Any inflation shock that occurs in response
to a tax reduction must be correlated with inflation in subsequent periods,
whether under a forward-looking or backward-looking relationship.<span style="mso-spacerun: yes;"> </span>So, if a current tax reduction is to be
recouped through an inflation tax, that must take place over time.<span style="mso-spacerun: yes;"> </span>And, throughout the period of higher inflation,
expected real interest rates are higher, which will impact on the pattern of
household spending.<span style="mso-spacerun: yes;"> </span>So, in this case,
the choice between taxation or bond issuance does make a difference. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It needs to be stressed that this is fully consistent with
rational expectations, provided we are considering an unexpected change in
taxation (or equivalently a change in actual taxation, following a known rule,
but in response to some other unexpected event).<span style="mso-spacerun: yes;"> </span>The standard New Keynesian Phillips curve has
current inflation as a function of expected inflation.<span style="mso-spacerun: yes;"> </span>We can equate expected inflation to the
actual outcome for every point in time where there are no unexpected tax policy
changes.<span style="mso-spacerun: yes;"> </span>But, if a new policy is
announced we have to allow for expectations to be revised accordingly.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In a standard New Keynesian model, therefore, we seem to
have two options as to how an unexpected tax reduction might play out:<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We can assume that people do not revise their inflation expectations and that they believe that the government will
increase taxes again in the future to pay off (with interest) the debt incurred
to finance the tax cut.<span style="mso-spacerun: yes;"> </span>In this case,
the model-consistent expectation solution is that there is no inflation shock,
and indeed the only way the government budget constraint can be met is by
increased future taxes. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Alternatively, we can
assume that people do not believe that the government will raise future taxes and that they revise their inflation expectations to take this into account.<span style="mso-spacerun: yes;"> </span>In this case, the model-consistent expectation
solution is an (unexpected) jump in inflation, followed by a steady fall in
inflation back to its baseline level.<span style="mso-spacerun: yes;"> </span>This
inflation erodes the value of outstanding debt and the government budget
constraint is indeed met without any future taxes.<br />
<br />
If we were using a non-monetary model, we would have no choice but to go
the first route, because there is no unexpected inflation.<span style="mso-spacerun: yes;"> </span>But once we think in terms of monetary
debts, there is no good reason for saying that the former should hold rather
than the latter.<span style="mso-spacerun: yes;"> </span>The first gives us the
classic Ricardian Equivalence result; the second does not.<br />
<br />
The path of output, inflation and (nominal) interest rate in this second case would be something like that shown below (model details at end of post). The shock occurs when the announcement is made. It makes no difference whether the tax reduction
is actually applied now or in the future. In that sense, the result is
still Ricardian.<br />
<br /></div>
<div class="MsoNormal">
<br />
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<w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
DefSemiHidden="true" DefQFormat="false" DefPriority="99"
LatentStyleCount="267">
<w:LsdException Locked="false" Priority="0" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Normal"/>
<w:LsdException Locked="false" Priority="9" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="heading 1"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 2"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 3"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 4"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 5"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 6"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 7"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 8"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 9"/>
<w:LsdException Locked="false" Priority="39" Name="toc 1"/>
<w:LsdException Locked="false" Priority="39" Name="toc 2"/>
<w:LsdException Locked="false" Priority="39" Name="toc 3"/>
<w:LsdException Locked="false" Priority="39" Name="toc 4"/>
<w:LsdException Locked="false" Priority="39" Name="toc 5"/>
<w:LsdException Locked="false" Priority="39" Name="toc 6"/>
<w:LsdException Locked="false" Priority="39" Name="toc 7"/>
<w:LsdException Locked="false" Priority="39" Name="toc 8"/>
<w:LsdException Locked="false" Priority="39" Name="toc 9"/>
<w:LsdException Locked="false" Priority="35" QFormat="true" Name="caption"/>
<w:LsdException Locked="false" Priority="10" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Title"/>
<w:LsdException Locked="false" Priority="1" Name="Default Paragraph Font"/>
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UnhideWhenUsed="false" QFormat="true" Name="Subtitle"/>
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UnhideWhenUsed="false" Name="Table Grid"/>
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UnhideWhenUsed="false" Name="Light Grid"/>
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<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2"/>
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<w:LsdException Locked="false" Priority="67" SemiHidden="false"
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<w:LsdException Locked="false" Priority="61" SemiHidden="false"
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<w:LsdException Locked="false" Priority="62" SemiHidden="false"
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<w:LsdException Locked="false" Priority="64" SemiHidden="false"
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<w:LsdException Locked="false" Priority="65" SemiHidden="false"
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<w:LsdException Locked="false" UnhideWhenUsed="false" Name="Revision"/>
<w:LsdException Locked="false" Priority="34" SemiHidden="false"
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UnhideWhenUsed="false" QFormat="true" Name="Quote"/>
<w:LsdException Locked="false" Priority="30" SemiHidden="false"
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<w:LsdException Locked="false" Priority="66" SemiHidden="false"
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<br />
<div class="MsoNormal">
A key point here is we are relying on the fact that, under
the government budget constraint, a current tax reduction can be made whole either
by an increase in future taxes or by a change in the rate at which future taxes
are discounted.<span style="mso-spacerun: yes;"> </span>The usual approach is to
assume that there needs to be a rise in futures taxes.<span style="mso-spacerun: yes;"> </span>This leads to a self-fulfilling loop:</div>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
a) Because there is an offsetting rise in future taxes,
there is no change in household spending and real interest rates remain unchanged.</div>
<div class="MsoNormal">
b) Because real interest rates remain unchanged, there needs
to be a increase in future taxes to meet the government budget constraint.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The trick is to recognise that when we have expectation
shocks and sticky prices, there is an alternative:</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
a) Because there is no offsetting rise in future taxes, households
spend more currently, causing a temporary, but drawn out, reduction in real
interest rates.</div>
<div class="MsoNormal">
b) Because of the reduction in future real interest rates,
the present value of future taxes is increased and so there is no need for
additional taxes to meet the government budget constraint.</div>
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In my view, this is actually quite an important point of
departure between mainstream and more heterodox approaches.<span style="mso-spacerun: yes;"> </span>If we come at this from a mindset that sees
the government budget constraint as something that dictates policy, rather than
simply an accounting identity, then we might naturally assume the former.<span style="mso-spacerun: yes;"> </span>But, if we take the view that the government
will just do what it thinks appropriate from time to time and we just need to
work out how the economy responds, then we might be more inclined to the
latter.<span style="mso-spacerun: yes;"> </span>And, in my opinion, the latter
is more plausible.<br />
<br />
<br />
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<br />
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Model</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The model I've used here is a standard three equation NK
model with an additional equation showing the evolution of the government debt
and the further condition that the level of debt is bounded (this is equivalent
to the government budget constraint).<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">(1)<span style="mso-tab-count: 1;"> </span>y<sub>t</sub> = E[y<sub>t+1</sub>] . (
β . i<sub>t+1</sub> / E[π<sub>t+1</sub>] )<sup>-σ</sup></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">(2)<span style="mso-tab-count: 1;"> </span>π<sub>t</sub> = E[π<sub>t+1</sub>]<sup>β</sup>
. y<sub>t</sub><sup>κ</sup></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">(3)<span style="mso-tab-count: 1;"> </span>i<sub>t+1</sub> = i* + φ<sub>π</sub> .
( E[π<sub>t+1</sub>] - 1 ) + φ<sub>y</sub> . ( E[y<sub>t+1</sub>] - 1 )</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">(4)<span style="mso-tab-count: 1;"> </span>b<sub>t</sub> = b<sub>t-1 . </sub>i<sub>t
</sub>/ π<sub>t</sub> - τ<sub>t</sub></span></div>
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<br /></div>
<div class="MsoNormal">
where y is output, π is inflation (both normalised to 1), i
is the nominal interest rate, <span style="mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">τ is tax</span> and b is the real value of government debt.<span style="mso-spacerun: yes;"> </span>Parameter values used are β = 0.97, σ = 1, κ
= 0.2, φ<sub>π</sub> = 0.5, φ<sub>y</sub> = 0.4 and i* is set at 1/β. The baseline level of tax is 0.2 and the shock is a one-off reduction by 0.05.</div>
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<br /></div>
<div class="MsoNormal">
The usual approach would be to take equation (4) and the
boundary condition simply to place a constraint on the level of taxes, in which
case it has no bearing on the other variables.<span style="mso-spacerun: yes;">
</span>What we are doing here is allowing taxes to be freely set, letting
expectations adjust when a change in tax policy is announced and using equation
(4), plus the boundary condition, to pin those expectations down.</div>
<br /></div>
Nick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.com27