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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Globalization and inflation in Europe
Raphael Auer
Kathrin Degen
Andreas M. Fischer

What is the impact of import competition from other low-wage countries (LWCs) on inflationary pressure in Western Europe? This paper seeks to understand whether labor-intensive exports from emerging Europe, Asia, and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, IV estimates predict that LWC import competition is associated with strong price effects. More specifically, when Chinese exporters capture 1 percent of European market share, producer prices decrease about 2 percent. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.

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Raphael Auer & Kathrin Degen & Andreas M. Fischer, Globalization and inflation in Europe, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 65, 2010.
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Note: Published as: Auer, Raphael, Kathrin Degen and Andreas M. Fischer (2013), "Low-wage Import Competition, Inflationary Pressure, and Industry Dynamics in Europe," European Economic Review 59: 141-166.
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