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Exchange Rate Appreciation and Export Price Competitiveness: Industry-specific real effective exchange rates of Japan, Korea, and China

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

Abstract

This paper constructs a new data set of the industry-specific real effective exchange rate (REER), based on the producer price indices, of the Japanese yen, Korean won, and Chinese renminbi on a daily basis from 2005 to the present in order to provide a better indicator for the international price competitiveness of the three countries. We show a large difference in the level of REER not only between the countries but also across industries. By conducting factor decomposition analysis of industry-specific REER, it is revealed that a substantial fall in domestic producer prices during the won appreciation period has enhanced Korean firms' export competitiveness compared to Japanese firms, especially in the electrical machinery industry. In contrast, Japanese automobile firms do not lose export competitiveness with respect to their Korean counterparts, due to the relative decline of domestic production costs.

Suggested Citation

  • SATO Kiyotaka & SHIMIZU Junko & Nagendra SHRESTHA & Shajuan ZHANG, 2013. "Exchange Rate Appreciation and Export Price Competitiveness: Industry-specific real effective exchange rates of Japan, Korea, and China," Discussion papers 13032, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13032
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    File URL: https://www.rieti.go.jp/jp/publications/dp/13e032.pdf
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    References listed on IDEAS

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    1. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
    2. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," Notas Económicas, Faculty of Economics, University of Coimbra, issue 30, pages 6-28, December.
    3. 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.
    4. Andre Varella Mollick, 2009. "Crisis and Volatility in Asian Versus Latin American Real Exchange Rates," Economie Internationale, CEPII research center, issue 117, pages 5-29.
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    Cited by:

    1. SATO Kiyotaka & SHIMIZU Junko & Nagendra SHRESTHA & Shajuan ZHANG, 2015. "Industry-specific Real Effective Exchange Rates in Asia," Discussion papers 15036, Research Institute of Economy, Trade and Industry (RIETI).
    2. Nikhil Patel & Zhi Wang & Shang-Jin Wei, 2014. "Global Value Chains and Effective Exchange Rates at the Country-Sector Level," NBER Working Papers 20236, National Bureau of Economic Research, Inc.
    3. Kiyotaka Sato & Junko Shimizu & Nagendra Shrestha & Shajuan Zhang, 2013. "Industry-specific Real Effective Exchange Rates and Export Price Competitiveness: The Cases of Japan, China, and Korea," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 298-321, December.
    4. SHIMIZU Junko & SATO Kiyotaka, 2015. "Abenomics, Yen Depreciation, Trade Deficit, and Export Competitiveness," Discussion papers 15020, Research Institute of Economy, Trade and Industry (RIETI).

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