Globalization and Inflation in Europe

46 Pages Posted: 6 Dec 2010

See all articles by Raphael Auer

Raphael Auer

Swiss National Bank; Bank for International Settlements (BIS)

Kathrin Degen

affiliation not provided to SSRN

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Date Written: December 2010

Abstract

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% of European market share, producer prices decrease about 2%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.

Keywords: comparative advantage, globalization, intra-industry trade

JEL Classification: F11, F12, F14, F16, F40

Suggested Citation

Auer, Raphael and Degen, Kathrin and Fischer, Andreas M., Globalization and Inflation in Europe (December 2010). CEPR Discussion Paper No. DP8130, Available at SSRN: https://ssrn.com/abstract=1718925

Raphael Auer (Contact Author)

Swiss National Bank ( email )

Fraumuensterstr. 8
Zurich, 8022
Switzerland

Bank for International Settlements (BIS)

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Kathrin Degen

affiliation not provided to SSRN

No Address Available

Andreas M. Fischer

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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