Exporting deflation? Chinese exports and Japanese prices
AbstractBetween 1992 and 2002, the Japanese Import Price Index (IPI) registered a decline of almost 9 percent and Japan entered a period of deflation. We show that much of the correlation between import prices and domestic prices was due to formula biases. Had the IPI been computed using a pure Laspeyres index like the CPI, the IPI would have hardly moved at all. A Laspeyres version of the IPI would have risen 1 percentage point per year faster than the official index. Second we show that Chinese prices did not behave differently from the prices of other importers. Although Chinese prices are substantially lower than the prices of other exporters, they do not exhibit a differential trend. However, we estimate that the typical price per unit quality of a Chinese exporter fell by half between 1992 and 2005. Thus the explosive growth in Chinese exports is attributable to growth in the quality of Chinese exports and the increase in new products being exported by China.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2008-29.
Date of creation: 2008
Date of revision:
Other versions of this item:
- Christian Broda & David E. Weinstein, 2010. "Exporting Deflation? Chinese Exports and Japanese Prices," NBER Chapters, in: China's Growing Role in World Trade, pages 203-227 National Bureau of Economic Research, Inc.
- David Weinstein & Christian Broda, 2008. "Exporting Deflation? Chinese Exports and Japanese Prices," NBER Working Papers 13942, National Bureau of Economic Research, Inc.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F1 - International Economics - - Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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