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Import prices and the competing goods effect

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  • Phillip Swagel

Abstract

I use disaggregated U.S. data from 1978 to 1988 to examine the impact of changes in the prices of imported manufactured goods on corresponding domestic prices--the \"competing goods effect.\" I use an econometric specification which allows for product differentiation between domestic and imported goods, and provides measures of exchange rate pass-through and economies of scale. ; I find that the impact of import prices on domestic prices varies substantially by industry, with statistically significant effects in nine of nineteen two-digit SIC manufacturing categoric:s. However, even where the effects are statistically significant, they are typically small in economic terms. On the whole, I do not find support for the anecdotal evidence that firms in US manufacturing industries take advantage of the reduced competitive discipline of higher ilnport prices. Because import prices are not a substantial determinant of domestic prices in the U.S., this implies that the consequent danger of imported inflation is small.>

Suggested Citation

  • Phillip Swagel, 1995. "Import prices and the competing goods effect," International Finance Discussion Papers 508, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:508
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    References listed on IDEAS

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    1. Feinberg, Robert M., 1996. "A simultaneous analysis of exchange-rate passthrough into prices of imperfectly substitutable domestic and import goods," International Review of Economics & Finance, Elsevier, vol. 5(4), pages 407-416.
    2. Steven B. Kamin & Mario Marazzi & John W. Schindler, 2004. "Is China \"exporting deflation\"?," International Finance Discussion Papers 791, Board of Governors of the Federal Reserve System (U.S.).
    3. Gordhan K. Saini, 2009. "Non-tariff measures and Indian textiles and clothing exports," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2009-002, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Scott Bradford, 2000. "Rents, Votes, and Protection: Explaining the Structure of Trade Barriers Across Industries," Econometric Society World Congress 2000 Contributed Papers 1717, Econometric Society.
    5. Gordhan K. Saini, 2009. "Non-Tariff Measures and Indian Textiles and Clothing Exports," Trade Working Papers 22407, East Asian Bureau of Economic Research.
    6. Dekle, Robert, 1998. "The yen and Japanese manufacturing employment," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 785-801, October.

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    Imports; Prices;

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