This paper constructs a new dataset of the industry‐specific real effective exchange rate, based on the producer price indices, for Japan, China, and Korea on a monthly basis from January 2001 to February 2013 in order to provide a better indicator for export price competitiveness. By conducting simulation analysis, we found that Korean electrical machinery firms substantially improved their cost competitiveness by lowering their production costs during the Korean won appreciation period, while Japanese firms' large plant investment caused by management misjudgments led to excessive production capacity, which resulted in the deterioration of Japanese export competitiveness. A structural vector autoregression analysis also reveals that industry differences of cost competitiveness as well as nominal exchange rate changes have significant impact on export performances of Japan and Korea.

for their helpful comments on the earlier version of this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

After the Asian currency crisis in 1997, the monetary authorities of East Asian countries have been strengthening their regional monetary cooperation. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities' surveillance process for their regional monetary cooperation. We calculate an Asian Monetary Unit (AMU) as a weighted average of East Asian currencies following the method used to calculate the European Currency Unit (ECU). Also, we calculate AMU Deviation Indicators which show how much each of the East Asian currencies deviates from a hypothetical benchmark rate in terms of the AMU. Furthermore, we investigate relationships between the AMU Deviation Indicators and the effective exchange rates, which mean international price competitiveness in terms of international trade. We found strong relationships between the AMU Deviation Indicators and the effective exchange rates except for some currencies. The results suggest that monitoring the AMU Deviation Indicator will be useful for the monetary authorities' surveillance in East Asia in order to stabilise their effective exchange rate or price competitiveness among the East Asian countries. Copyright 2006 The Authors Journal compilation 2006 Blackwell Publishing Ltd .

The purpose of this paper is to identify determinants of currency invoicing among Japanese exporting firms with firm-level data, overcoming the usual limitation of data availability, by interviewing 23 representative Japanese firms in three industriesautomobile, electrical machinery and general machinery. Major findings are as follows. First, invoicing in the importer's currency is prevalent in exports to advanced countries, because most of exports by the globally operating firms are destined for local retail subsidiaries of respective firms, which conforms to the pricing-to-market behaviour discussed in the literature. Second, Japanese firms that export highly differentiated products or have a dominant share in the global market tend to invoice their exporting products in the yen both to advanced countries and to developing countries. Third, although Japanese firms have shifted their production bases to Asian countries, exports from Japan to these Asian production subsidiaries tend to be invoiced in US dollars as long as the final destination market is in the USA.

We wish to thank all respondents of firms and RIETI staff for their kind help and cooperation. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.