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Globalization and inflation in Europe

  • Auer, Raphael
  • Degen, Kathrin
  • Fischer, Andreas M.

What is the impact of import competition from other low-wage countries (LWCs) on inflationary pressure in Western Europe? This paper seeks to understand whether labor-intensive exports from emerging Europe, Asia, and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, IV estimates predict that LWC import competition is associated with strong price effects. More specifically, when Chinese exporters capture 1 percent of European market share, producer prices decrease about 2 percent. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.

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File URL: http://dallasfed.org/assets/documents/institute/wpapers/2010/0065.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 65.

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Length: 43 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:fip:feddgw:65
Note: Published as: Auer, Raphael, Kathrin Degen and Andreas M. Fischer (2013), "Low-wage Import Competition, Inflationary Pressure, and Industry Dynamics in Europe," European Economic Review 59: 141-166.
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