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International Production Networks and Export/Import Responsiveness to Exchange Rates: The case of Japanese manufacturing firms

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  • ANDO Mitsuyo
  • IRIYAMA Akie
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    Abstract

    This paper examines how international production/distribution networks provide individual firms with exporting/importing responsiveness to exchange rate movements. With the micro-data of Japanese manufacturing firms from 1994 to 2004, we find that firms' exports tend to respond to exchange rate movements, in particular (1) when firms are large in size, (2) when majority-owned affiliates are dominant among their foreign affiliates, and (3) when their intra-firm trade ratio is moderately high. Furthermore, these tendencies are more salient for machinery firms, one of the major players in international production networks in East Asia. The results suggest that Japanese manufacturing firms, particularly machinery firms, with greater foreign operations under their own corporate control would more fully absorb shocks of exchange rate movements by adjusting intra-firm transactions. We do not find such tendencies for imports, however. The study provides implications for international production networks, which have developed drastically in East Asia.

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    Bibliographic Info

    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09049.

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    Length: 28 pages
    Date of creation: Sep 2009
    Date of revision:
    Handle: RePEc:eti:dpaper:09049

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    1. Mitsuyo Ando & Fukinari Kimura, 2003. "The Formation of International Production and Distribution Networks in East Asia," NBER Working Papers 10167, National Bureau of Economic Research, Inc.
    2. Menzie D. Chinn, 2003. "Doomed to Deficits? Aggregate U.S. Trade Flows Re-Examined," NBER Working Papers 9521, National Bureau of Economic Research, Inc.
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    4. Kozo Kiyota & Toshiyuki Matsuura & Shujiro Urata, 2008. "EXCHANGE RATE VOLATILITY AND MNCs' PRODUCTION AND DISTRIBUTION NETWORKS: THE CASE OF JAPANESE MANUFACTURING MNCs," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 523-538.
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    12. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
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    Cited by:
    1. Fukunari Kimura & Ayako Obashi, 2011. "Production Networks in East Asia : What We Know So Far," Trade Working Papers 23216, East Asian Bureau of Economic Research.

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