Changing Comparative Advantage, Real Exchange Rate Impact and Sino–Japanese Trade Fluctuations

Abstract

China, as an important source country in the global value chain, especially in the East Asian production networks, has exerted significant influence on Sino–Japanese trade fluctuations. This paper explores the real factors that lead to the fluctuations in Sino–Japanese trade. Using the Hodrick–Prescott filter technique and OECD–WTO Statistics on Trade in Value Added from 1995 to 2011, the impact of the changing comparative advantage between the two countries is also examined. The empirical results indicate that determinants of the fluctuations in Sino–Japapese trade include changing comparative advantages, the volatility of the real exchange rate and quite a few external shocks. Some policy suggestions are put forward in regards to the stability of trade between the two countries.

Challenges in Achieving Consensus on Data Localization: Digital Inequality of Digital Service Trade

“…Balassa (1965) believes that the economies of scale complicates the measure of comparative advantage. Baskaran et al (2011) and Qiu et al (2016) assert that the network effects can diminish or substitute the impact of factor endowments, rending the capital and labor factors less effective. In fact, economies of scale indeed exist in the digital sector, but it is considered here as an advantage of factor endowment instead of enterprises' market power.…”

Challenges in Achieving Consensus on Data Localization: Digital Inequality of Digital Service Trade

“…believes that the economies of scale complicates the measure of comparative advantage Baskaran et al (2011). andQiu et al (2016) assert that the network effects can diminish or substitute the impact of factor endowments, rending the capital and labor factors less effective. In fact, economies of scale indeed exist in the digital sector, but it is considered here as an advantage of factor endowment instead of enterprises' market power Sundararajan et al (2013).…”