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Import Penetration and Consumer Prices

Author

Listed:
  • Koichiro Kamada

    (Bank of Japan)

  • Naohisa Hirakata

    (Bank of Japan)

Abstract

This paper shows that changes in international competitiveness played a significant role in creating the deflationary pressure in Japan from 1980 to 2001. Applying Blanchard and Quah's (1989) SVAR technique to Dornbusch, Fischer, and Samuelson's (1977) classical comparative advantage model, we break down Japan's inflation rate of the consumer prices into three kinds of structural shocks: comparative advantage shocks, global productivity shocks, and cyclical demand shocks. The breakdown results tell us that the Japanese economy had been exposed to severe international competition since 1994, especially from the Asian economies. Japan's loss of international competitiveness had exerted continuous downward pressure on the consumer prices and deflationary pressure strengthened significantly at the very end of the 20th century.

Suggested Citation

  • Koichiro Kamada & Naohisa Hirakata, 2002. "Import Penetration and Consumer Prices," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    • Handle: RePEc:boj:bojwps:02-e-1r
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    References listed on IDEAS

    as
    1. Kamada, Koichiro & Masuda, Kazuto, 2001. "Effects of Measurement Error on the Output Gap in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 109-154, May.
    2. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    3. Yasuo Hirose & Koichiro Kamada, 2001. "A New Technique for Simultaneous Estimation of the Output Gap and Phillips Curve," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    4. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    5. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
    6. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. J. Boeckx & P. Butzen & N. Cordemans & S. Ide, 2015. "Deflation in Japan, Abenomics and lessons for the euro area," Economic Review, National Bank of Belgium, issue i, pages 100-124, June.
    2. Baba, Naohiko & Nishioka, Shinichi & Oda, Nobuyuki & Shirakawa, Masaaki & Ueda, Kazuo & Ugai, Hiroshi, 2005. "Japan's Deflation, Problems in the Financial System, and Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(1), pages 47-111, February.
    3. Takashi Kozu & Ko Nakayama & Aiko Mineshima & Yumi Saita, 2002. "Changes in Japan's Export and Import Structures," Bank of Japan Research Papers 2002-05-30, Bank of Japan.
    4. Diego Winkelried & Marco Vega, 2004. "How Does Global Disinflation Drag Inflation in Small Open Economies?," Econometric Society 2004 Latin American Meetings 76, Econometric Society.
    5. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    6. Mr. Taimur Baig, 2003. "Understanding the Costs of Deflation in the Japanese Context," IMF Working Papers 2003/215, International Monetary Fund.
    7. Marco Antonio Vega de la Cruz & Diego Winkelried Quezada, 2004. "The Dragging Effect of World Inflation in Small Open Economies," Premio de Banca Central Rodrigo Gómez / Central Banking Award "Rodrigo Gómez", Centro de Estudios Monetarios Latinoamericanos, CEMLA, number prg2004eng, July-Dece.
    8. Yasuo Hirose & Koichiro Kamada, 2002. "Time-Varying NAIRU and Potential Growth in Japan," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    9. Marco Antonio Vega de la Cruz & Diego Winkelried Quezada, 2004. "El efecto arrastre de la inflación mundial en economías pequeñas y abiertas," Premio de Banca Central Rodrigo Gómez / Central Banking Award "Rodrigo Gómez", Centro de Estudios Monetarios Latinoamericanos, CEMLA, number prg2004, July-Dece.
    10. Frondel, Manuel & Schmidt, Torsten & Vance, Colin & Zimmermann, Tobias & Belke, Ansgar, 2008. "Einfluss von Preisschocks auf die Preisentwicklung in Deutschland: Forschungsvorhaben des Bundesministeriums für Wirtschaft und Technologie. Projekt-Nr. I D 4-020815-16/07. Endbericht - Oktober 2008," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 70890, Fall.
    11. Munehisa Kasuya & Toshihiro Okada, 2003. "The Effects of Technology Changes on the Sectoral Trade Patterns and the Import Penetration Ratio," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.

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    More about this item

    Keywords

    comparative advantage; consumer prices; import penetration;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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