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Exporting Deflation? Chinese Exports and Japanese Prices

In: China's Growing Role in World Trade

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  • Christian Broda
  • David E. Weinstein

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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Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberch:10459
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    References listed on IDEAS

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    1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
    2. Christian Broda & David E. Weinstein, 2007. "Defining Price Stability in Japan: A View from America," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 169-206, December.
    3. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    4. Paul R. Bergin & Robert C. 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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    Citations

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    Cited by:

    1. Auer, Raphael & Fischer, Andreas M., 2010. "The effect of low-wage import competition on U.S. inflationary pressure," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 491-503, May.
    2. Shin-ichi Fukuda, 2008. "The Rise of China and Sustained Recovery of Japan," CARF F-Series CARF-F-135, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. repec:wsi:ceprxx:v:01:y:2012:i:01:n:s1793969012500070 is not listed on IDEAS
    4. 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.
    5. Larry D. Qiu & Chaoqun Zhan, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 45-71, February.
    6. Luh, Yir-Hueih & Jiang, Wun-Ji & Huang, Szu-Chi, 2016. "Trade-related spillovers and industrial competitiveness: Exploring the linkages for OECD countries," Economic Modelling, Elsevier, vol. 54(C), pages 309-325.
    7. Shin-ichi Fukuda & Munehisa Kasuya, 2010. "The Rise of China and the Japanese Economy: Evidence from Macro and Firm-level Micro Data," Bank of Japan Working Paper Series 10-E-1, Bank of Japan.
    8. Sawhney, Aparna & Kahn, Matthew E., 2012. "Understanding cross-national trends in high-tech renewable power equipment exports to the United States," Energy Policy, Elsevier, vol. 46(C), pages 308-318.
    9. Filip Abraham & Jan Van Hove, 2011. "Chinese competition in OECD markets: impact on the export position and export strategy of OECD countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 14(2), pages 151-170.
    10. Maurice Obstfeld, 2009. "Time of Troubles: The Yen and Japan's Economy, 1985-2008," NBER Working Papers 14816, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • 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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