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Industry-specific Real Effective Exchange Rates for Japan

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  • SATO Kiyotaka
  • SHIMIZU Junko
  • Nagendra SHRESTHA
  • Shajuan ZHANG

Abstract

In considering the empirical importance of the exchange rate on exporters' price competitiveness and producer profits in specific industries, the industry-specific real effective exchange rate (REER) is far more useful than the aggregate REER published by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). The novelty of this study is to construct a new dataset of the industry-specific REER of the yen on a daily basis from 2005 to the present to provide a better indicator for the international price competitiveness of Japanese exporters. By conducting simulation analysis, we show whether recent fluctuations of the REER have been driven by various factors such as domestic and foreign price changes. By running a near-vector autoregression (VAR) estimation with block exogeneity, we demonstrate that Japanese exports of major machinery industries are affected not by the nominal exchange rate shock but by the world output fluctuations and the domestic price changes in Japan.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 12044.

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Length: 20 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:eti:dpaper:12044

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  1. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," Working Paper 95-6, Federal Reserve Bank of Atlanta.
  2. Zha, Tao, 1999. "Block recursion and structural vector autoregressions," Journal of Econometrics, Elsevier, vol. 90(2), pages 291-316, June.
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Cited by:
  1. ITO Keiko & SHIMIZU Junko, 2013. "Industry-Level Competitiveness, Productivity, and Effective Exchange Rates in East Asia," Discussion papers 13094, Research Institute of Economy, Trade and Industry (RIETI).

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