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China’s impact on pass-through to US import prices

Michael Malenbaum (Department of Economics, Iona College, New Rochelle, New York, USA)

Journal of Chinese Economic and Foreign Trade Studies

ISSN: 1754-4408

Article publication date: 28 March 2019

Issue publication date: 16 April 2019

148

Abstract

Purpose

This paper aims to analyze the marked decline in exchange rate pass-through to US import prices in the early 2000s focusing on the increased role of China as a trade partner. In particular, the research focuses on the impact of an exporter with a fixed exchange rate having large market shares of a particular importing country.

Design/methodology/approach

The study uses highly disaggregated US import data and rolling regressions to calculate quarterly pass-through estimates for specific goods from every exporter. This leads to a total of over 1.7 million pass-through coefficients. The second stage compares these pass-through coefficients with China’s share of US import market for that particular good and time.

Findings

The paper shows that as China’s market share for specific goods grows, pass-through rates of imports from other countries falls. Pass-through rates remain relatively stable for goods that China does not export to the USA or goods for which China’s share of US imports stays constant. This relationship is stronger when the dollar decreases in value, further suggesting that pressure from China forces competitors to maintain stable prices.

Originality/value

This paper is unique in its use of highly disaggregated data on US imports. While many analyses of exchange rate pass-through focus on overall levels or general goods, this work uses import data at the 10-digit HTS code level. Therefore, the findings are more detailed in showing how China’s increased presence in the US market influences prices of imports from other countries.

Keywords

Citation

Malenbaum, M. (2019), "China’s impact on pass-through to US import prices", Journal of Chinese Economic and Foreign Trade Studies, Vol. 12 No. 1, pp. 55-72. https://doi.org/10.1108/JCEFTS-11-2018-0043

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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