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The impact of exchange rate changes on the Japanese chemical industry

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  • Thorbecke, Willem
  • Salike, Nimesh
  • Chen, Chen

Abstract

We investigate how exchange rates affect the Japanese chemical industry. This industry exports sophisticated products to downstream firms. Since more complex products are less substitutable in international trade, we investigate whether they have lower price elasticities. We measure complexity using Hidalgo and Hausmann’s (2009) product complexity index. We find that price elasticities are lower for more complex chemical goods. We also find that stock returns of chemical firms that occupy vital niches in the world economy are harmed less by yen appreciations. These results indicate that exporting sophisticated products can reduce export volatility and profit volatility arising from exchange rate swings.

Suggested Citation

  • Thorbecke, Willem & Salike, Nimesh & Chen, Chen, 2022. "The impact of exchange rate changes on the Japanese chemical industry," Japan and the World Economy, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:japwor:v:62:y:2022:i:c:s0922142522000202
    DOI: 10.1016/j.japwor.2022.101135
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    1. agarwal, shekhar & Gordon, Anna, 2022. "Complexities for the Indian Economy of China's Growing Technological Competence," OSF Preprints fk3r7, Center for Open Science.
    2. agarwal, shekhar, 2022. "India’s Rising Technology Economy: Sources and Consequences," OSF Preprints x6yzm, Center for Open Science.

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    More about this item

    Keywords

    Japan; Chemical industry; Exchange rate elasticities; Exchange rate exposure; Product complexity index;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F10 - International Economics - - Trade - - - General

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