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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: https://www.bankofcanada.ca/wp-content/uploads/2010/01/dp07-10.pdf
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    References listed on IDEAS

    as
    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.
    2. Alexander Murray, 2017. "The Effect of Import Competition on Employment in Canada: Evidence from the 'China Shock'," CSLS Research Reports 2017-03, Centre for the Study of Living Standards.
    3. Myeongwan Kim, 2020. "The Price Effect of Trade: Evidence of the China Shock and Canadian Consumer Prices," CSLS Research Reports 2020-02, Centre for the Study of Living Standards.
    4. Dany Brouillette & Laurence Savoie-Chabot, 2017. "Global Factors and Inflation in Canada," Staff Analytical Notes 17-17, Bank of Canada.

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      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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