Currency values, prices, consumption and incomes are at the heart of the economic performance of all countries. In order to make a meaningful comparison between one economy and another, economists routinely make use of purchasing power parity (PPP) exchange rates, but while PPP rates are widely used and well understood, they take a lot of effort to produce and suffer from publication delays. Currencies, Commodities and Consumption analyses the strengths and weaknesses of two alternatives to PPP. Firstly, the so-called Big Mac Index, which uses hamburger prices as a standard of measurement, and second, a less well known technique which infers incomes across countries based on the proportion of consumption devoted to food. Kenneth W. Clements uses international macroeconomics, microeconomic theory and econometrics to provide researchers and policy makers with insights into alternatives to PPP rates and make sense of the ongoing instability of exchange rates and commodity prices.

‘The next few decades in global markets are likely to be dominated by the impact of the growth in China and the rest of Asia. Clements provides not only a thorough analysis of currencies and commodity prices to understand this development, he explicitly addresses - and provides great insight into - the mispricing that happens in such markets … This book is not only a very useful source to understand our changing economic world but it also provides a plethora of useful data from a variety of sources - and the output from Clements' own research - to satisfy both the needs of academics and those analysing financial markets across asset classes. There is sufficient information in an accessible form for readers to extend their own research using Clements' methodology.’

Ron Bewley - Woodhall Investment Research Pty Ltd and former Chief Investment Officer, Commonwealth Bank of Australia

‘This book has a broad sweep, analyzing diverse issues such as purchasing power parities, commodity and marihuana prices, income and consumption comparisons across countries. What makes reading this book so exciting is the constant moving from theory to practice and back to theory; and the discovery that understanding one subject helps to understand other, at first sight, unrelated subjects.’

Paul De Grauwe - London School of Economics and Political Science

‘The concepts of demand, supply and equilibrium tease out the roles of commodities and exchange rates in a nation’s fortunes. Renowned for his pioneering yet accessible research, this book finds Professor Clements at the peak of his powers. The book will be a key reference in advanced courses on international economics, international finance and applied econometrics.’

Geoff Kingston - Macquarie University

‘'Currency values, prices, consumption and incomes are intimately linked and are at the heart of the economic performance of all countries', Kenneth W. Clements tells us in the introduction to Currencies, Commodities and Consumption. And in the pages that follow Clements melds theory and empirics in interesting ways to provide important insights into the behavior of all of these variables. The specific topics [he] covers include purchasing power parity and The Economist’s Big Mac Index, commodity currencies and exchange rates, commodity-price behavior, differences in real incomes and price levels internationally and the links between expenditures on food and real incomes. The reader who pays attention to what Clements has to say will come away with a better knowledge and deeper understanding of all of these issues.’

James R. Lothian - Distinguished Professor of Finance and Toppeta Family Chair in Global Financial Markets, Fordham University

'Professor Kenneth W. Clements’ book is a major contribution to the literature on the important relationship between currencies, commodities and consumption. The work is creative, highly professional, and very informative. The analysis is anchored in deep historical perspective with sophisticated empirical techniques. His presentation of the material is clear and accessible. A very useful book.'

Jacob A. Frenkel - Chairman, J. P. Morgan Chase International