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New estimates of exchange rate pass-through in Japanese exports An earlier version of this paper was presented at the 10th International Convention of the East Asian Economic Association in Beijing, China

Author

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  • Craig R. Parsons

    (Yokohama National University, Japan)

  • Kiyotaka Sato

    (Yokohama National University, Japan)

Abstract

Recently, the issue of a decline in exchange rate pass-through has gained much more attention. Taylor conjectures that a worldwide decline in exchange rate pass-through is related to the low and stable inflation in many industrialized countries since the early 1990s. Developments of 'new open-economy macroeconomics' also cast renewed attention on exchange rate pass-through. Theoretical research shows that the choice of an optimal exchange rate regime and the transmission of monetary policy impacts depend crucially on the exporter's price setting behaviour. There are many studies on the pass-through of Japanese exports, yet most studies simply use the industry-breakdown data on export price indices, which is insufficient to assess pass-through patterns in regional trade. Significantly, highly disaggregated (HS 9-digit level) commodity data are used here to evaluate the extent of pass-through by commodity and by destination. We investigate and compare the extent of pass-through to East Asia, Europe, and the US. We also examine whether there is any difference in the degree of pass-through in the pre- and post-Asian crisis era. Results suggest the most pricing-to-market (PTM) occurs in exports to the US market followed by significant, but less PTM in Europe. Virtually no PTM is found in Japanese exports to East Asia. Also, there is no clear evidence of either increasing or decreasing pass-through over time. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Craig R. Parsons & Kiyotaka Sato, 2008. "New estimates of exchange rate pass-through in Japanese exports An earlier version of this paper was presented at the 10th International Convention of the East Asian Economic Association in Beijing, C," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 174-183.
  • Handle: RePEc:ijf:ijfiec:v:13:y:2008:i:2:p:174-183
    DOI: 10.1002/ijfe.337
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    References listed on IDEAS

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    1. David C. Parsley, 2004. "Pricing in International Markets: a "Small-country" Benchmark," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 509-524, August.
    2. Gary R. Saxonhouse, 1993. "Pricing Strategies and Trading Blocs in East Asia," NBER Chapters,in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 89-124 National Bureau of Economic Research, Inc.
    3. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    4. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    5. Kiyotaka Sato, 1999. "The International Use of the Japanese Yen: The Case of Japan's Trade with East Asia," The World Economy, Wiley Blackwell, vol. 22(4), pages 547-584, June.
    6. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    7. Takatoshi Ito & Kiyotaka Sato, 2006. "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through," CIRJE F-Series CIRJE-F-406, CIRJE, Faculty of Economics, University of Tokyo.
    8. Gil-Pareja, Salvador, 2002. "Export Price Discrimination in Europe and Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 299-312, May.
    9. Craig R. Parsons & Kiyotaka Sato, 2006. "Exchange Rate Pass-through and Currency Invoicing: Implications for Monetary Integration in East Asia," The World Economy, Wiley Blackwell, vol. 29(12), pages 1759-1788, December.
    10. Kenichi Ohno, 1989. "Export Pricing Behavior of Manufacturing: A U.S.: Japan Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 550-579, September.
    11. Otani, Akira & Shiratsuka, Shigenori & Shirota, Toyoichiro, 2006. "Revisiting the Decline in the Exchange Rate Pass-Through: Further Evidence from Japan's Import Prices," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(1), pages 61-75, March.
    12. Kiyotaka Sato, 2003. "Currency Invoicing in Japanese Exports to East Asia: Implications for Yen Internationalization," Asian Economic Journal, East Asian Economic Association, vol. 17(2), pages 129-154, June.
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    Cited by:

    1. Yoshida, Yushi, 2010. "New evidence for exchange rate pass-through: Disaggregated trade data from local ports," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 3-12, January.
    2. Jacques Jaussaud & Serge Rey, 2012. "Long‐Run Determinants Of Japanese Exports To China And The United States: A Sectoral Analysis," Pacific Economic Review, Wiley Blackwell, vol. 17(1), pages 1-28, February.
    3. Yushi Yoshida, 2009. "Market Share and Exchange Rate Pass-through:Competition among Exporters of the Same Nationality," Discussion Papers 37, Kyushu Sangyo University, Faculty of Economics.
    4. Baoying Lai & Nathan Lael Joseph, 2010. "Pricing-to-market and the volatility of UK export prices," Applied Financial Economics, Taylor & Francis Journals, vol. 20(18), pages 1441-1460.
    5. Ceglowski, Janet, 2010. "Has pass-through to export prices risen? Evidence for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 24(1), pages 86-98, March.

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