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Exporting Deflation? Chinese Exports and Japanese Prices

  • David Weinstein
  • Christian Broda

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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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 Exporting Deflation? Chinese Exports and Japanese Prices , Christian Broda, David E. Weinstein. in China's Growing Role in World Trade , Feenstra and Wei. 2010
Handle: RePEc:nbr:nberwo:13942
Note: ITI
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  1. 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.).
  2. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  3. 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.
  4. 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.
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