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Consumer prices in Denmark 1502-2007
Danmarks Nationalbank Working Papers, No. 60
Provided in Cooperation with:
Danmarks Nationalbank, Copenhagen
Suggested Citation: Abildgren, Kim (2009) : Consumer prices in Denmark 1502-2007, Danmarks Nationalbank Working Papers, No. 60
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WORKING PAPERS2009 • 60 Kim Abildgren Danmarks Nationalbank Economics Consumer Prices in Denmark 1502-2007 February 2009 The Working Papers of Danmarks Nationalbank describe research and development, often still ongoing, as a contribution to the professional debate.
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ISSN (trykt/print) 1602-1185 ISSN (online) 1602-1193 Consumer Prices in Denmark 1502-20071
The author wishes to thank colleagues from Danmarks Nationalbank for useful comments on preliminary versions of this paper. The author alone is responsible for any remaining errors.
Abstract The paper presents a consumer price index for Denmark 1502-2007. For the post-1815 period the index is based on existing CPI figures whereas new data has been constructed for the preperiod. For the earliest years 1502-1712 the new CPI covers only the price of corn, whereas the period 1712-1800 is based on the comprehensive price material collected in relation to the recently completed Danish Price History Project. If one define price stability as an inflation rate around 2 per cent per annum, or lower, the past five centuries in Denmark has been dominated by price stability. Disregarding actual war periods there seems only to have been one major exception from the overall picture of price stability: The first four decades following the end of the Second World War where inflation expectations lost their anchor.
Key words: Inflation, consumer prices index, price history.
JEL Classification: C43; E31; N13; N14.
Resumé (Danish summary) I papiret præsenteres et forbrugerprisindeks for Danmark 1502-2007. For perioden efter 1815 er indekset baseret på eksisterende forbrugerprisindeks, mens der konstrueres nye data for perioden før 1815. For de tidligste år 1502-1712 omfatter det nye forbrugerprisindeks udelukkende kornpriser, mens perioden 1712-1800 er baseret på det omfattende prismateriale, som er indsamlet i relation til det nyligt afsluttede projekt om Dansk Prishistorie. Hvis man definerer prisstabilitet som en årlig inflationsrate på omkring 2 pct. eller derunder, har de sidste fem århundrede i Danmark været domineret af prisstabilitet. Ses der bort fra egentlige krigsperioder er der kun én enkelt undtagelse fra det overordnede billede af prisstabilitet: De første fire årtier efter afslutningen af 2. verdenskrig, hvor inflationsforventningerne mistede deres anker.
2. Table of contents
2. A CPI for Denmark 1502-2007 - Data sources and compilation methods
3. Price level and inflation in Denmark 1502-2007 – A brief review
4. Concluding remarks
Annex A: CPI for Denmark 1502-2007
1. Introduction The focus on price stability within the central-banking community during the most recent decades has created a renewed research interest in long-span historical time series on price developments. Norges Bank published e.g. a comprehensive collection of historical monetary statistics in 2004, which included a new consumer price index for Norway 1516-20032, and more recently Sveriges Riksbank has published a consumer price index for Sweden 1290An “official” consumer price index (CPI) for Denmark is available from Statistics Denmark for the period since 1914, and data back to 1815 have been constructed in relation to various historical studies on economic growth and cost of living. However, so far no Danish CPI has been available for the period prior to 1815.
The paper at hand presents a consumer price index for Denmark 1502-2007. For the postperiod the index is based on existing CPI figures whereas new data has been constructed for the pre-1815 period. For the earliest years 1502-1712 the new CPI covers only the price of corn, whereas the period 1712-1800 is based on the comprehensive price material collected in relation to the Danish Price History Project 1660-1800, which was initiated in 1939 and completed in 2004. Furthermore, the paper offers a brief review of the inflationary development in Denmark during the past five centuries based on the new CPI data.
2. A CPI for Denmark 1502-2007 - Data sources and compilation methods The description of the main sources and methods applied for the construction of the CPI for Denmark 1502-2007 can be divided in eight parts covering eight different time spans, cf. the exposition below. For each subperiod a CPI was constructed, and these indices were subsequently chained together to the overall index. Annex A lists the new CPI data set which also is available in electronic form on request from the author.
The geographical coverage of the index prior to 1920 is the Kingdom of Denmark excluding Norway4, the Royal Duchies Schleswig and Holstein5 and other former Danish Cf. Grytten (2004).
Cf. Edvinsson & Söderberg (2007).
With the peace settlement in Kiel in January 1814 Norway became independent of Denmark after more than 400 years of union.
Schleswig and Holstein were attached to the Danish monarchy in 1460 but became part of Germany after the Second Schleswig War in 1864. In June 1920 Sønderjylland (the northern part of the old Duchy of Schleswig) was reunited with Denmark after a referendum in accordance with the Versailles Treaty.
territories6. Since 1920 the coverage correspond to the current geographical delimitation of Denmark.
An important issue to consider in relation to long-term historical price studies is the choice of currency unit (mint standard) in periods where notes and coins based on several different currency units circulated simultaneously. The aim of the paper at hand has been to use prices quoted in the currency unit most frequently used for transactions purposes at the time of transaction and then subsequently chain these indices together in order to avoid break in series. The choice of currency units used in different periods is illustrated in table 1.
According to international statistical guidelines CPIs are:
“... index numbers that measure changes in the prices of goods and services purchased or otherwise acquired by households, which households use directly, or indirectly, to satisfy their own needs and wants.”7 The guidelines contain detailed recommendations for the proper methodology and data sources that should be used for compiling modern CPIs of a high statistical quality. However, even though an attempt has been made to transform the primary data into a reasonable consistent time series on consumer price inflation, the quality of a data set spanning more Skåne, Halland, Blekinge were lost to Sweden following the end of the First Karl Gustav War in 1658. Iceland became a sovereign state in personal union with Denmark in 1918. The personal union between Denmark and Iceland ceased in 1944.
Quotation from §1.3 in ILO et al. (2004).
than 500 years is always questionable. Data availability also seriously limits the choice of methodology used for the compilations. Furthermore, both retail and wholesale markets have changed a lot during the period regarding e.g. the organisation and structure of the trade sector, the degree of product differentiation, the composition of private consumption, the size of ordinary households etc., cf. also Kackmeister (2007). The results and conclusions of the paper at hand have therefore to be taken with “a pinch of salt”.
1502-1660 Consistent information on the price development in Denmark in the period prior to 1660 is very scarce. For this period corn prices has been used as a proxy for the development in consumer prices. The sources are Falbe-Hansen (1869) and Scharling (1869).8 For the 1552-1600 period these authors offer annual observations on prices on rye and barley and for 1600-1660 on rye, barley and oats based mainly on accounting records from the University of Copenhagen supplemented with farm gate prices used for the assessment of tithes in Sjællands Stift. Scharling, op.cit., notes9 that Sjællands Stift is normally believed to be representative for the corn price development in Denmark during this period.10 For the period 1552-1660 the price series are fairly complete with only a few years of missing observations.