IDEAS home Printed from https://ideas.repec.org/p/fip/fedfwp/2008-29.html
   My bibliography  Save this paper

Exporting deflation? Chinese exports and Japanese prices

Author

Listed:
  • Christian Broda
  • David E. Weinstein

Abstract

Between 1992 and 2002, the Japanese Import Price Index (IPI) 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.

Suggested Citation

  • Christian Broda & David E. Weinstein, 2008. "Exporting deflation? Chinese exports and Japanese prices," Working Paper Series 2008-29, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:2008-29
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/publications/economics/papers/2008/wp08-29bk.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    2. 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.
    3. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    4. Paul R. Bergin & Robert C. Feenstra, 2008. "Pass-through of exchange rates and competition between Mexico and China," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    5. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kozo Kiyota, 2023. "Spatially uneven pace of deindustrialisation within a country," The World Economy, Wiley Blackwell, vol. 46(7), pages 2187-2230, July.
    2. Larry D. Qiu & Chaoqun Zhan, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 45-71, February.
    3. Shin-Ichi Fukuda & Munehisa Kasuya, 2012. "A Rise Of China And The Japanese Economy: Evidence From Macro- And Firm-Level Micro-Data," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-27.
    4. Maurice Obstfeld, 2009. "Time of Troubles: The Yen and Japan's Economy, 1985-2008," NBER Working Papers 14816, National Bureau of Economic Research, Inc.
    5. Auer, Raphael & Fischer, Andreas M., 2010. "The effect of low-wage import competition on U.S. inflationary pressure," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 491-503, May.
    6. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.), The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.
    7. Fu, Xiaolan & Kaplinsky, Raphael & Zhang, Jing, 2012. "The Impact of China on Low and Middle Income Countries’ Export Prices in Industrial-Country Markets," World Development, Elsevier, vol. 40(8), pages 1483-1496.
    8. Takahashi, Shuhei, 2021. "The uniqueness of steady-state equilibrium under state-dependent pricing: The case of deflation," Economics Letters, Elsevier, vol. 209(C).
    9. Luh, Yir-Hueih & Jiang, Wun-Ji & Huang, Szu-Chi, 2016. "Trade-related spillovers and industrial competitiveness: Exploring the linkages for OECD countries," Economic Modelling, Elsevier, vol. 54(C), pages 309-325.
    10. Sawhney, Aparna & Kahn, Matthew E., 2012. "Understanding cross-national trends in high-tech renewable power equipment exports to the United States," Energy Policy, Elsevier, vol. 46(C), pages 308-318.
    11. Filip Abraham & Jan Van Hove, 2011. "Chinese competition in OECD markets: impact on the export position and export strategy of OECD countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 14(2), pages 151-170.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mary Amiti & Caroline Freund, 2010. "The Anatomy of China's Export Growth," NBER Chapters, in: China's Growing Role in World Trade, pages 35-56, National Bureau of Economic Research, Inc.
    2. Masashige Hamano, 2013. "On business cycles of variety and quality," DEM Discussion Paper Series 13-21, Department of Economics at the University of Luxembourg.
    3. Masashige Hamano & Francesco Zanetti, 2018. "On Quality and Variety Bias in Aggregate Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(6), pages 1343-1363, September.
    4. Geoffrey Barrows & Hélène Ollivier & Ariell Reshef, 2023. "Production Function Estimation with Multi-Destination Firms," CESifo Working Paper Series 10716, CESifo.
    5. Stephen J. Redding & David E. Weinstein, 2017. "Aggregating from Micro to Macro Patterns of Trade," NBER Working Papers 24051, National Bureau of Economic Research, Inc.
    6. Robert Z. Lawrence & Lawrence Edward, 2010. "Do Developed and Developing Countries Compete Head to Head in High Tech?," Working Paper Series WP10-8, Peterson Institute for International Economics.
    7. Hamano, Masashige, 2013. "The consumption-real exchange rate anomaly with extensive margins," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 26-46.
    8. David O. Argente & Chang-Tai Hsieh & Munseob Lee, 2020. "Measuring the Cost of Living in Mexico and the US," NBER Working Papers 27806, National Bureau of Economic Research, Inc.
    9. Giuntella, Osea & Rieger, Matthias & Rotunno, Lorenzo, 2020. "Weight gains from trade in foods: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 122(C).
    10. Dutt, Pushan & Mihov, Ilian & Van Zandt, Timothy, 2013. "The effect of WTO on the extensive and the intensive margins of trade," Journal of International Economics, Elsevier, vol. 91(2), pages 204-219.
    11. Chen, Natalie & Novy, Dennis, 2012. "On the measurement of trade costs: direct vs. indirect approaches to quantifying standards and technical regulations," World Trade Review, Cambridge University Press, vol. 11(3), pages 401-414, July.
    12. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    13. Martin Andersson & Börje Johansson, 2008. "Innovation Ideas and Regional Characteristics: Product Innovations and Export Entrepreneurship by Firms in Swedish Regions," Growth and Change, Wiley Blackwell, vol. 39(2), pages 193-224, June.
    14. Facundo Albornoz & Ezequiel García Lembergman, 2015. "Importing After Exporting," Working Papers 122, Universidad de San Andres, Departamento de Economia, revised Jul 2015.
    15. Ardelean, Adina & Lugovskyy, Volodymyr, 2010. "Domestic productivity and variety gains from trade," Journal of International Economics, Elsevier, vol. 80(2), pages 280-291, March.
    16. Bolatto, Stefano & Moramarco, Graziano, 2023. "Gains from trade and their quantification: Does sectoral disaggregation matter?," International Economics, Elsevier, vol. 174(C), pages 44-68.
    17. Oleg Itskhoki, 2021. "The Story of the Real Exchange Rate," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 423-455, August.
    18. David Atkin & Benjamin Faber & Marco Gonzalez-Navarro, 2018. "Retail Globalization and Household Welfare: Evidence from Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 1-73.
    19. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.
    20. Hersh, Jonathan & Voth, Hans-Joachim, 2022. "Sweet diversity: Colonial goods and the welfare gains from global trade after 1492," Explorations in Economic History, Elsevier, vol. 86(C).

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfwp:2008-29. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Federal Reserve Bank of San Francisco Research Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.