The ‘Amazon Effect’ Can Drive Prices Up, Too
The influence of a growing online retail industry increases consumers’ exposure to the fluctuations of energy prices and exchange rates.
The “Amazong effect” isn’t one way.
Photographer: Jeenah Moon/Bloomberg
In recent years, the so-called “Amazon effect” has been used to explain low inflation in developed economies: Prices are supposedly lower – and more transparent – online, forcing offline retailers to reduce prices. The effect, however, can go both ways – the influence of e-commerce makes prices fluctuate more often, reacting immediately to shocks like energy price and exchange rate jumps.
The “Amazon effect” is such a buzzword that Federal Reserve Chairman Jerome Powell and Bank of Japan governor Haruhiko Kuroda mentioned it earlier this year as one of the reasons for slow price growth. Research conducted in Europe also appears to show that e-commerce growth pushes inflation down.