look at prices over a long periods of time. Movement of the commodity prices should be about the same as irrationalities cancel out. If its true for each commodity it is true for index numbers. Non-traded goods the argument is that the relationship will generally apply, but they are a weakness of the model.
Two columns - ratio of rpi between two years in local currency. Second section is the ratio of currency per year periods. Last one is the combined (movement in rpi adjusted to exchange rate). The last column should be the same number.
One does not use the percentage change, you use the ratios. The outcome is not a very good indicator.
Use the mean, variation and coeficient of variation to measure the dispersion.
Coefcient of variation = standard deviation/average. 36% is a large variation.
But there might be freak cases.
European figgures are not that different at all.
Note that coefficient of variation is smaller for rpi unadjusted.
If we allow BoP problem to enterthen outliers should have major Balance of Payments problems.
1. Japan - it had a productivity increase. Can be approximated to the growth of real capita per person over the years. It is seen that japan had a major productivity increase. Japan did very well in spite the fact that jep appreciated a lot.
a. In particular the growth varied between different industries. Export industries (electronics) had especially high productivity growth.
b. Japanese was improving the marketing a lot. Very dynamic production (producing what a market wants). Developing new products.
c. Entrepreneurs were prepared to increaase the capacity of their industries.
2. USA did not develop a surplus, despite the low inflation.
a. Japan competition. Americans exported cars etc. as well.
b. Oil problems. Americans produce oil. The supply of unexploited oil has been exhausted. By 1980 oil was a third of USA import
Up to 1994 then the data gets better (if we exclude Japan). Japan differences was caused not by inflation but by the large appreciation. Japan continued to have rise in efficiency of export industries in 1990's. Efficiency is best measured by the unit valeu of manufactured exports in USDs. This is looking at the price competitive element, and Japan does not very good.
Everything is very interconnected in economics, but the effects can be extracted and you get a fair bit of explanation of local prices if you look at the exchange rates.