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Dynamics of Price Transmission: Evidence from India’s Import Basket

Author

Listed:
  • Sonam Choudhry
  • Abhinav Narayanan
  • Anshul

Abstract

This article uses granular information on trade flows between India and its trading-partners to estimate the impact of price changes on the import basket in general. We first investigate whether a change in world prices at the commodity level triggers a reorganisation of trading partners. Second, we examine the degree of transmission of world prices to Indian import prices. Lastly, we look at whether India imports less from countries that charge a higher markup on a product. Our results indicate that a change in world prices does not significantly change the set of importing countries. Using the country–product level price changes, we find a higher degree of transmission as compared to the world prices. This provides an important policy implication. In order to determine how the transmission of world prices to import prices works, we need to pay attention to the product price changes in the partner countries rather than focusing on the world prices. Lastly, we find that India imports less of a particular product on average from a country that charges a higher markup for that product relative to the average export prices charged by that country. JEL Codes: F14, F60, F02, Q27

Suggested Citation

  • Sonam Choudhry & Abhinav Narayanan & Anshul, 2024. "Dynamics of Price Transmission: Evidence from India’s Import Basket," Foreign Trade Review, , vol. 59(2), pages 252-278, May.
    • Handle: RePEc:sae:fortra:v:59:y:2024:i:2:p:252-278
    DOI: 10.1177/00157325231158848
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade

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