The Federal Reserve Board eagle logo links to Board's home page

International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Import Prices and the Competing Goods Effect
Phillip Swagel
1995-508  (April 1995)

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.

Full paper(548 KB PDF)

PDF files: Adobe Acrobat Reader   ZIP files: PKWARE


Home | IFDPs | List of 1995 IFDPs
Accessibility | Contact Us
Last update: September 17, 2008