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The Direct Effect of China on Canadian Consumer Prices: An Empirical Assessment

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  • Louis Morel
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    Abstract

    The author investigates the direct effect of Chinese imported goods on consumer prices in Canada. On average, over the 2001-06 period, the direct effect of consumer goods imported from China is estimated to have reduced the inflation rate by about 0.1 percentage points per year. This disinflationary effect is due to two causes: first, the Chinese share of Canadian imports of consumer goods has been increasing rapidly in recent years, and second, the price of these goods is much lower in China than it is among Canada's other import sources, as well as domestic producers. Chinese goods will continue to have a disinflationary impact on Canadian prices as long as the price of these goods remains lower than what can be produced in Canada, or by other trading partners, and as long as the Chinese share of Canadian imports continues to increase.

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    File URL: http://www.bankofcanada.ca/en/res/dp/2007/dp07-10.pdf
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    Bibliographic Info

    Paper provided by Bank of Canada in its series Discussion Papers with number 07-10.

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    Length: 25 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:bca:bocadp:07-10

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    Keywords: Inflation and prices;

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    1. Roy, Francine, 2004. "Canada's Trade with China," Insights on the Canadian Economy, Statistics Canada, Economic Analysis 2004007e, Statistics Canada, Economic Analysis.
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    Cited by:
    1. Denise Côté & Carlos de Resende, 2008. "Globalization and Inflation: The Role of China," Working Papers, Bank of Canada 08-35, Bank of Canada.

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