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Import prices and the competing goods effect

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Author Info
Phillip Swagel

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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.>

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 508.

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Date of creation: 1995
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Handle: RePEc:fip:fedgif:508

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Keywords: Imports ; Prices;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March. [Downloadable!] (restricted)
  2. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February. [Downloadable!] (restricted)
  3. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May. [Downloadable!] (restricted)
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  4. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August. [Downloadable!] (restricted)
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  5. Susanto Basu & John G. Fernald, 1994. "Constant returns and small markups in U.S. manufacturing," International Finance Discussion Papers 483, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. Feenstra, R.C. & Gagnon, J.E. & Knetter, M.M., 1993. "Market Share and Exchange Rate Pass-Through in World Automobile Trade," Papers 93-14, California Davis - Institute of Governmental Affairs.
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  7. 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. [Downloadable!] (restricted)
  8. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November. [Downloadable!] (restricted)
  9. Knetter, Michael M, 1994. "Did the Strong Dollar Increase Competition in U.S. Product Markets?," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 192-95, February. [Downloadable!] (restricted)
  10. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August. [Downloadable!] (restricted)
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  11. Fisher, Eric, 1989. "A model of exchange rate pass-through," Journal of International Economics, Elsevier, vol. 26(1-2), pages 119-137, February. [Downloadable!] (restricted)
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  12. Paul R. Krugman & Richard E. Baldwin, 1987. "The Persistence of the U.S. Trade Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1987-1), pages 1-56. [Downloadable!]
  13. Kenneth A. Froot & Paul Klemperer, 1989. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
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Cited by:
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  1. 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. [Downloadable!]
  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.). [Downloadable!]
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