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Import prices and the competing goods effect

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  • Phillip Swagel

Abstract

I use disaggregated U.S. data from 1978 to 1988 to examine the impact of changes in the prices of imported manufactured goods on corresponding domestic prices--the \"competing goods effect.\" I use an econometric specification which allows for product differentiation between domestic and imported goods, and provides measures of exchange rate pass-through and economies of scale. ; I find that the impact of import prices on domestic prices varies substantially by industry, with statistically significant effects in nine of nineteen two-digit SIC manufacturing categoric:s. However, even where the effects are statistically significant, they are typically small in economic terms. On the whole, I do not find support for the anecdotal evidence that firms in US manufacturing industries take advantage of the reduced competitive discipline of higher ilnport prices. Because import prices are not a substantial determinant of domestic prices in the U.S., this implies that the consequent danger of imported inflation is small.>

Suggested Citation

  • Phillip Swagel, 1995. "Import prices and the competing goods effect," International Finance Discussion Papers 508, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:508
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    References listed on IDEAS

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    1. Feinberg, Robert M., 1996. "A simultaneous analysis of exchange-rate passthrough into prices of imperfectly substitutable domestic and import goods," International Review of Economics & Finance, Elsevier, vol. 5(4), pages 407-416.
    2. Scott Bradford, 2000. "Rents, Votes, and Protection: Explaining the Structure of Trade Barriers Across Industries," Econometric Society World Congress 2000 Contributed Papers 1717, Econometric Society.
    3. Steven B. Kamin & Mario Marazzi & John W. Schindler, 2004. "Is China \"exporting deflation\"?," International Finance Discussion Papers 791, Board of Governors of the Federal Reserve System (U.S.).
    4. Gordhan K. Saini, 2009. "Non-Tariff Measures and Indian Textiles and Clothing Exports," Trade Working Papers 22407, East Asian Bureau of Economic Research.
    5. Gordhan K. Saini, 2009. "Non-tariff measures and Indian textiles and clothing exports," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2009-002, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Dekle, Robert, 1998. "The yen and Japanese manufacturing employment," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 785-801, October.

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    Keywords

    Imports; Prices;

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