Affiliation:
1. Department of Economic Policy and Research, Reserve Bank of India, Mumbai, India
2. Financial Markets Operations Department, Reserve Bank of India, Mumbai, India
Abstract
This article uses granular information on trade flows between India and its trading-partners to estimate the impact of price changes on the import basket in general. We first investigate whether a change in world prices at the commodity level triggers a reorganisation of trading partners. Second, we examine the degree of transmission of world prices to Indian import prices. Lastly, we look at whether India imports less from countries that charge a higher markup on a product. Our results indicate that a change in world prices does not significantly change the set of importing countries. Using the country–product level price changes, we find a higher degree of transmission as compared to the world prices. This provides an important policy implication. In order to determine how the transmission of world prices to import prices works, we need to pay attention to the product price changes in the partner countries rather than focusing on the world prices. Lastly, we find that India imports less of a particular product on average from a country that charges a higher markup for that product relative to the average export prices charged by that country.JEL Codes: F14, F60, F02, Q27
Subject
Marketing,General Economics, Econometrics and Finance,Business and International Management
Reference67 articles.
1. Acharya S. S., Chand R., Birthal P. S., Kumar S. & Negi D. S. (2012). Market integration and price transmission in India: A case of rice and wheat with special reference to the world food crisis of 2007/08 (pp. 447–456). Food and Agriculture Organization.
2. Competitiveness and external trade performance of the French manufacturing industry
3. Testing the law of one price in the Chinese wholesale food markets
4. Impact of trade liberalization and world price changes in Bangladesh: a computable general equilibrium analysis