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Does China have Inflationary Effects on the USA and Japan?

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  • Necmettin Tarhan Feyzioglu
  • Luke Byrne Willard

Abstract

With China's share in global trade increasing rapidly, some argued in 2002‐2003 that China was exporting deflation to other countries as it was dumping cheap goods in mature markets. Later, others argued that China was causing sharp increases in global prices. This paper uses several econometric techniques to assess the extent of the link between inflation rates between China and the USA and Japan. Only limited empirical evidence at the aggregate level is found for consumer price inflation in China leading to price changes in the USA and Japan. However, there is some evidence that inflation in the USA has an impact on Chinese inflation. The results seem consistent with the Federal Reserve and the Bank of Japan being concerned about inflation and, hence, adjusting policy such that inflation shocks have no significant effect on overall inflation. Recent Chinese price rises are unlikely to have a material effect on the USA or Japan.

Suggested Citation

  • Necmettin Tarhan Feyzioglu & Luke Byrne Willard, 2008. "Does China have Inflationary Effects on the USA and Japan?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 1-16, January.
    • Handle: RePEc:bla:chinae:v:16:y:2008:i:1:p:1-16
    DOI: 10.1111/j.1749-124X.2008.00096.x
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    References listed on IDEAS

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    Cited by:

    1. Nagayasu, Jun, 2009. "Regional Inflation in China," MPRA Paper 24722, University Library of Munich, Germany.
    2. Gern, Klaus-Jürgen & van Roye, Björn & Scheide, Joachim, 2011. "Higher inflation in China: Risks for inflation and output in advanced economies," Kiel Policy Brief 36, Kiel Institute for the World Economy (IfW Kiel).

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