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The Direct Effect of China on Canadian Consumer Prices: An Empirical Assessment

Author

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  • Louis Morel

Abstract

The author investigates the direct effect of Chinese imported goods on consumer prices in Canada. On average, over the 2001-06 period, the direct effect of consumer goods imported from China is estimated to have reduced the inflation rate by about 0.1 percentage points per year. This disinflationary effect is due to two causes: first, the Chinese share of Canadian imports of consumer goods has been increasing rapidly in recent years, and second, the price of these goods is much lower in China than it is among Canada's other import sources, as well as domestic producers. Chinese goods will continue to have a disinflationary impact on Canadian prices as long as the price of these goods remains lower than what can be produced in Canada, or by other trading partners, and as long as the Chinese share of Canadian imports continues to increase.

Suggested Citation

  • Louis Morel, 2007. "The Direct Effect of China on Canadian Consumer Prices: An Empirical Assessment," Discussion Papers 07-10, Bank of Canada.
  • Handle: RePEc:bca:bocadp:07-10
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    File URL: http://www.bankofcanada.ca/en/res/dp/2007/dp07-10.pdf
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    References listed on IDEAS

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    1. Roy, Francine, 2004. "Canada's Trade with China," Insights on the Canadian Economy 2004007e, Statistics Canada, Economic Analysis Division.
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    Cited by:

    1. Denise Côté & Carlos de Resende, 2008. "Globalization and Inflation: The Role of China," Staff Working Papers 08-35, Bank of Canada.

    More about this item

    Keywords

    Inflation and prices;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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