Industry‐specific Real Effective Exchange Rates and Export Price Competitiveness: The Cases of <scp>J</scp>apan, <scp>C</scp>hina, and <scp>K</scp>orea

Sato, Kiyotaka; Shimizu, Junko; Shrestha, Nagendra; Zhang, Shajuan

doi:10.1111/aepr.12032

Cited by 47 publications

(33 citation statements)

References 14 publications

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“…Our attempt to incorporate sector‐level price indices and build sector‐ level exchange rates has a precedent in the work of Bennett and Zarnic (), Sato et al. (), Ito and Shimizu (), and Goldberg (). However, their work does not incorporate trade in intermediate goods or uses a weighting matrix that ignores intersectoral linkages.…”

Section: Related Literaturementioning

confidence: 99%

“…They, however, do not allow for sectoral heterogeneity, which we find to be a critical feature in determining patterns in competitiveness, and do not consider REERs at the sector level. 4 Our attempt to incorporate sector-level price indices and build sector-level exchange rates has a precedent in the work of Bennett and Zarnic (2009), Sato et al (2013), Ito and Shimizu (2015), and Goldberg (2004). However, their work does not incorporate trade in intermediate goods or uses a weighting matrix that ignores intersectoral linkages.…”

Section: Related Literaturementioning

confidence: 99%

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Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Patel¹,

Wang²,

Wei³

2019

J of Money Credit Banking

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The real effective exchange rate (REER) is one of the most cited statistics in open‐economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within a country participate in international production sharing at different stages, sector‐level variations are also important for determining competitiveness. Incorporating these features, we develop a framework to compute REER at both the sector and country level and apply it on intercountry input‐output tables to study the properties of the new measures.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Patel¹,

Wang²,

Wei³

2019

J of Money Credit Banking

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“…Figure 2 illustrates the producer price index (PPI)-based RER of Asian currencies visa-vis the US dollar. Following Sato et al (2013Sato et al ( , 2015, industry-specific RERs are also presented in Figure 2. 5 The RER tends towards short-run fluctuations, and the degree of fluctuations differs not only across countries but also across industries, which suggests that intra-Asian currencies will exhibit large exchange rate fluctuations.…”

Section: Preliminary Evidence Of the Asian Trade And Exchange Ratesmentioning

confidence: 99%

“… Sato et al . (, ) constructed industry‐specific real effective exchange rate (REER) of the nine Asian currencies utilizing the industry‐specific PPIs. Data on the industry‐specific REERs are available on the website of the Research Institute of Economy, Trade and Industry (RIETI) at http://www.rieti.go.jp/users/eeri/en/index.html. …”

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confidence: 99%

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

Sato

Shimizu

Shrestha

et al. 2016

Scottish J Political Eco

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This paper empirically analyzes the effect of exchange rate volatility on intra-Asian trade of intermediate goods at an industry level by constructing a new dataset of the industry-specific bilateral real exchange rate. As the final processed exports are destined for countries outside the Asian region, both the exchange rate and world demand are considered as a possible driving force in the cross-border fragmentation and processing trade. It is found that, in contrast to the recent studies, the exchange rate impact on intra-regional trade differs across industries. The exchange rate volatility has negative and significant effects only on the general machinery industry and a part of the electric machinery industry with more differentiated products, even when taking into account the world's demand for the final processed exports. These findings are supported by various kinds of exchange rate volatility in the short-and long-run. Our empirical results suggest that the different impact of the exchange rate volatility across industries is tied to the characteristics of traded goods in respective industries.

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“…In a follow‐up study, Sato et al. () further constructed industry‐specific EER for China and Korea to provide a better explanation for industry‐specific export price competitiveness among the three countries . Decomposing industry‐specific REER into various factors, Sato et al.…”

Section: Overview Of Factors Explaining Countries’ International Compmentioning

confidence: 99%

Industry‐Level Competitiveness, Productivity and Effective Exchange Rates in East Asia

Ito

Shimizu

2015

Asian Economic Journal

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In this paper, we investigate export competitiveness based on unit labor costs (ULC) and nominal effective exchange rates for Japan, China and Korea for 12 manufacturing industries at the two-digit International Standard Industrial Classification level for the period 2001-2009. Japan's ULC are relatively stable or declining in most industries, while Korea's ULC show an upward trend in many industries, with the electrical and optical equipment industry being a major exception. China's ULC are declining in most industries. Evaluating ULC on a foreign currencies basis, Japan's ULC increased rapidly during the period of yen appreciation, suggesting that Japan's cost reduction efforts were more than offset by the appreciation of the yen. The results of our empirical analysis suggest that both increases in ULC and appreciation of the home currency reduce exports by raising the home country's relative prices. The negative impact of ULC is largest for China, while it is negligible for Japan. However, the negative impact of nominal effective exchange rates is largest for Japan. Moreover, the negative impact of ULC tends to be larger for machinery-related industries, suggesting that cost competitiveness is particularly important in these industries.

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Industry‐specific Real Effective Exchange Rates and Export Price Competitiveness: The Cases of Japan, China, and Korea

Cited by 47 publications

References 14 publications

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

Industry‐Level Competitiveness, Productivity and Effective Exchange Rates in East Asia

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