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Exporting Deflation? Chinese Exports and Japanese Prices

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  • David Weinstein
  • Christian Broda

Abstract

Between 1992 and 2002, the Japanese Import Price Index 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13942.

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Date of creation: Apr 2008
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Publication status: published as Christian Broda, David E. Weinstein. "Exporting Deflation? Chinese Exports and Japanese Prices," in Robert C. Feenstra and Shang-Jin Wei, editors, "China's Growing Role in World Trade" University of Chicago Press (2010)
Handle: RePEc:nbr:nberwo:13942

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  1. Christian Broda & David Weinstein, 2004. "Globalization and the gains from variety," Staff Reports 180, Federal Reserve Bank of New York.
  2. Christian Broda & David E. Weinstein, 2007. "Defining Price Stability in Japan: A View from America," NBER Working Papers 13255, National Bureau of Economic Research, Inc.
  3. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  4. Paul Bergin & Rob Feenstra, 2008. "Pass-through of exchange rates and competition between Mexico and China," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Auer, Raphael & Fischer, Andreas M, 2008. "The Effect of Trade with Low-Income Countries on U.S. Industry," CEPR Discussion Papers 6819, C.E.P.R. Discussion Papers.
  2. Fu, Xiaolan & Kaplinsky, Raphael & Zhang, Jing, 2012. "The Impact of China on Low and Middle Income Countries’ Export Prices in Industrial-Country Markets," World Development, Elsevier, vol. 40(8), pages 1483-1496.
  3. Aparna Sawhney & Matthew E. Kahn, 2011. "Understanding Cross-National Trends in High-Tech Renewable Power Equipment Exports to the United States," NBER Working Papers 17217, National Bureau of Economic Research, Inc.
  4. Shin-ichi Fukuda, 2008. "The Rise of China and Sustained Recovery of Japan," CIRJE F-Series CIRJE-F-589, CIRJE, Faculty of Economics, University of Tokyo.
  5. Maurice Obstfeld, 2009. "Time of Troubles: The Yen and Japan's Economy, 1985-2008," NBER Working Papers 14816, National Bureau of Economic Research, Inc.

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