The effects of low-cost countries on Portuguese manufacturing import prices

This paper estimates the direct effect of low-cost countries on Portuguese manufacturing import prices, using detailed data both by product and by geographical market for the period 1997-2006. The results point to a negative but modest direct effect when compared with studies available for other countries. This is understandable given the lower share of low-cost countries in Portuguese imports. However, besides this direct effect, import prices were influenced by several other factors, some also related to the increasing presence of low-cost countries in international markets. Overall, this lower direct effect was not reflected in a differentiated evolution of manufacturing import prices in Portugal as its evolution was very close to the average of the euro area countries