Working Paper

Import prices and the competing goods effect

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.>

Keywords: Imports; Prices;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1995

Number: 508