IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/09049.html
   My bibliography  Save this paper

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

Author

Listed:
  • ANDO Mitsuyo
  • IRIYAMA Akie

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.

Suggested Citation

  • ANDO Mitsuyo & IRIYAMA Akie, 2009. "International Production Networks and Export/Import Responsiveness to Exchange Rates: The case of Japanese manufacturing firms," Discussion papers 09049, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:09049
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/09e049.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Yoko Oguro & Kyoji Fukao & Yougesh Khatri, 2008. "Trade Sensitivity to Exchange Rates in the Context of Intra-Industry Trade," IMF Working Papers 08/134, International Monetary Fund.
    2. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, April.
    3. Subramanian Rangan, 1998. "Do Multinationals Operate Flexibly? Theory and Evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(2), pages 217-237, June.
    4. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters,in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
    5. Menzie D. Chinn, 2004. "Incomes, Exchange Rates and the US Trade Deficit, Once Again," International Finance, Wiley Blackwell, vol. 7(3), pages 451-469, December.
    6. Pozo, Susan, 1992. "Conditional Exchange-Rate Volatility and the Volume of International Trade: Evidence from the Early 1900s," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 325-329, May.
    7. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 71-106, February.
    8. Menzie D. Chinn, 2005. "Doomed to Deficits? Aggregate U.S. Trade Flows Re-Examined," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(3), pages 460-485, October.
    9. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
    10. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    11. Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310.
    12. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, vol. 30(3-4), pages 301-316, May.
    13. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, vol. 34(3), pages 271-275, November.
    14. Bruce Kogut & Nalin Kulatilaka, 1994. "Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network," Management Science, INFORMS, vol. 40(1), pages 123-139, January.
    15. Sazanami, Yoko & Kimura, Fukunari & Kawai, Hiroki, 1997. "Sectoral Price Movements under the Yen Appreciation," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 611-641, December.
    16. 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 111-125, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kimura, Fukunari & Obashi, Ayako, 2011. "Production Networks in East Asia: What We Know So Far," ADBI Working Papers 320, Asian Development Bank Institute.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:09049. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (KUMAGAI, Akiko). General contact details of provider: http://edirc.repec.org/data/rietijp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.