IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/23013.html

Global Value Chains and Exchange Rate Pass-through into the Import Prices of Japanese Industries

Author

Listed:
  • Fabien RONDEAU
  • Yushi YOSHIDA

Abstract

With internationally fragmented processes of production or global value chains, value-added components of a country’s export include the importer’s contributions as well as the contributions of third countries. The exchange rate sensitivity of export price reflects these value-added components. We examine the effect of value-added contributions of exporters and importers on the degree of exchange rate pass-through by focusing on the Japanese import prices by industry. Our results show that exchange rate pass-through increases for industries with a higher contribution of exporting countries’ value-added and for industries with a lower contribution of the importing country’s value-added. The differentials in value-added help explain the dynamics of exchange rate pass-through at the industry level.

Suggested Citation

  • Fabien RONDEAU & Yushi YOSHIDA, 2023. "Global Value Chains and Exchange Rate Pass-through into the Import Prices of Japanese Industries," Discussion papers 23013, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:23013
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/23e013.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, vol. 67(1), pages 129-155, September.
    2. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    3. Auer, Raphael A. & Schoenle, Raphael S., 2016. "Market structure and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 98(C), pages 60-77.
    4. Thi-Ngoc Anh Nguyen & Kiyotaka Sato, 2020. "Invoice currency choice, nonlinearities and exchange rate pass-through," Applied Economics, Taylor & Francis Journals, vol. 52(10), pages 1048-1069, February.
    5. Etsuro Shioji, 2014. "A Pass-Through Revival," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(1), pages 120-138, January.
    6. Gita Gopinath & Emine Boz & Camila Casas & Federico J. Díez & Pierre-Olivier Gourinchas & Mikkel Plagborg-Møller, 2020. "Dominant Currency Paradigm," American Economic Review, American Economic Association, vol. 110(3), pages 677-719, March.
    7. Arpita Chatterjee & Rafael Dix-Carneiro & Jade Vichyanond, 2013. "Multi-product Firms and Exchange Rate Fluctuations," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 77-110, May.
    8. Yushi YOSHIDA & Weiyang ZHAI & Yuri SASAKI & Siyu ZHANG, 2022. "Exchange Rate Pass-through Under the Unconventional Monetary Policy Regime," Discussion papers 22020, Research Institute of Economy, Trade and Industry (RIETI).
    9. Ahmed Swarnali & Appendino Maximiliano & Ruta Michele, 2017. "Global value chains and the exchange rate elasticity of exports," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-24, January.
    10. Georgiadis, Georgios & Gräb, Johannes, 2019. "Global value chain participation and exchange rate pass-through to export and import prices," Economic Bulletin Articles, European Central Bank, vol. 5.
    11. Joaquim Martins Guilhoto & Colin Webb & Norihiko Yamano, 2022. "Guide to OECD TiVA Indicators, 2021 edition," OECD Science, Technology and Industry Working Papers 2022/02, OECD Publishing.
    12. repec:upd:utppwp:050 is not listed on IDEAS
    13. Zhi Wang & Shang-Jin Wei & Xinding Yu & Kunfu Zhu, 2017. "Characterizing Global Value Chains: Production Length and Upstreamness," NBER Working Papers 23261, National Bureau of Economic Research, Inc.
    14. Hoshi, Takeo & Kiyota, Kozo, 2019. "Potential for inward foreign direct investment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 32-52.
    15. Sasaki, Yuri & Yoshida, Yushi & Otsubo, Piotr Kansho, 2022. "Exchange rate pass-through to Japanese prices: Import prices, producer prices, and the core CPI," Journal of International Money and Finance, Elsevier, vol. 123(C).
    16. Jan Ditzen & Yiannis Karavias & Joakim Westerlund, 2022. "Multiple Structural Breaks in Interactive Effects Panel Data and the Impact of Quantitative Easing on Bank Lending," Papers 2211.06707, arXiv.org, revised Jan 2023.
    17. Rudolfs Bems & Robert C. Johnson, 2017. "Demand for Value Added and Value-Added Exchange Rates," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 45-90, October.
    18. Etsuro Shioji, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation," Working Papers e092, Tokyo Center for Economic Research.
    19. Cigna, Simone & Gunnella, Vanessa & Quaglietti, Lucia, 2022. "Global value chains: measurement, trends and drivers," Occasional Paper Series 289, European Central Bank.
    20. de Soyres, François & Frohm, Erik & Gunnella, Vanessa & Pavlova, Elena, 2021. "Bought, sold and bought again: The impact of complex value chains on export elasticities," European Economic Review, Elsevier, vol. 140(C).
    21. Shioji, Etsuro, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?," Journal of the Japanese and International Economies, Elsevier, vol. 37(C), pages 43-58.
    22. By Shinji Takagi & Yushi Yoshida, 2001. "Exchange Rate Movements and Tradable Goods Prices in East Asia: An Analysis Based on Japanese Customs Data, 1988–1999," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 266-289.
    23. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    24. Nishitateno, Shuhei, 2013. "Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 64-80.
    25. Nguyen, Thi-Ngoc Anh & Sato, Kiyotaka, 2019. "Firm predicted exchange rates and nonlinearities in pricing-to-market," Journal of the Japanese and International Economies, Elsevier, vol. 53(C), pages 1-1.
    26. Borin,Alessandro & Mancini,Michele & Taglioni,Daria, 2021. "Economic Consequences of Trade and Global Value Chain Integration : A Measurement Perspective," Policy Research Working Paper Series 9785, The World Bank.
    27. Urata, Shujiro & Baek, Youngmin, 2022. "Impacts of firm's GVC participation on productivity: A case of Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).
    28. Shambaugh, Jay, 2008. "A new look at pass-through," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 560-591, June.
    29. Ha, Jongrim & Marc Stocker, M. & Yilmazkuday, Hakan, 2020. "Inflation and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 105(C).
    30. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    31. Georgiadis, Georgios & Gräb, Johannes & Khalil, Makram, 2019. "Global value chain participation and exchange rate pass-through," Working Paper Series 2327, European Central Bank.
    32. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2022. "Dominant Currencies: How Firms Choose Currency Invoicing and Why it Matters," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1435-1493.
    33. Khee Giap Tan & Luu Nguyen Trieu Duong & Hui Yin Chuah, 2019. "Impact of exchange rates on ASEAN's trade in the era of global value chains: An empirical assessment," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(7), pages 873-901, October.
    34. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
    35. Yoshida, Yushi & Zhai, Weiyang, 2025. "Can exchange rate pass-throughs be perverse? A robust multiple-prior Bayesian SVAR approach," Journal of International Money and Finance, Elsevier, vol. 154(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yoshihiko Hogen & Yojiro Ito & Kenji Kanai & Naoya Kishi, 2024. "Changes in the Global Economic Landscape and Issues for Japan's Economy," Bank of Japan Working Paper Series 24-E-3, Bank of Japan.
    2. Eva Ortega & Chiara Osbat, 2020. "Exchange rate pass-through in the euro area and EU countries," Occasional Papers 2016, Banco de España.
    3. Zhang, Wenqian & Wei, Hao, 2025. "The impact of RMB exchange rate changes on the prices of imported products by Chinese firms," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 464-478.
    4. de Soyres, François & Frohm, Erik & Gunnella, Vanessa & Pavlova, Elena, 2021. "Bought, sold and bought again: The impact of complex value chains on export elasticities," European Economic Review, Elsevier, vol. 140(C).
    5. Ha, Jongrim & Marc Stocker, M. & Yilmazkuday, Hakan, 2020. "Inflation and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 105(C).
    6. Natalie Chen & Wanyu Chung & Dennis Novy, 2022. "Vehicle Currency Pricing and Exchange Rate Pass-Through," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 312-351.
    7. Bhushan Praveen Jangam & Hari Venkatesh, 2022. "Global Value Chains and Exchange Rate Disconnect," Economic Papers, The Economic Society of Australia, vol. 41(4), pages 347-359, December.
    8. Calì, Massimiliano & Graciano, Simón Caicedo & Ghose, Devaki & Montfaucon, Angella Faith & Ruta, Michele, 2026. "Trade policy and exporters’ resilience: Evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 179(C).
    9. Sasaki, Yuri & Yoshida, Yushi & Otsubo, Piotr Kansho, 2022. "Exchange rate pass-through to Japanese prices: Import prices, producer prices, and the core CPI," Journal of International Money and Finance, Elsevier, vol. 123(C).
    10. Biswajit Banerjee & Juraj Zeman, 2022. "Determinants of global value chain participation: cross-country analysis," Indian Economic Review, Springer, vol. 57(1), pages 59-95, June.
    11. Yoshida, Yushi & Zhai, Weiyang, 2025. "Can exchange rate pass-throughs be perverse? A robust multiple-prior Bayesian SVAR approach," Journal of International Money and Finance, Elsevier, vol. 154(C).
    12. Md Deluair Hossen, 2023. "Exchange Rate Pass-Through and Data Frequency: Firm-Level Evidence from Bangladesh," Papers 2303.04101, arXiv.org.
    13. Bolatto, Stefano & Grazzi, Marco & Tomasi, Chiara, 2022. "Export modes and firms’ adjustments to exchange rate movements," European Economic Review, Elsevier, vol. 141(C).
    14. de Walque, Gregory & Lejeune, Thomas & Rannenberg, Ansgar & Wouters, Raf, 2023. "Low pass-through and international synchronization in general equilibrium: Reassessing vertical integration," Journal of International Economics, Elsevier, vol. 140(C).
    15. Kawasaki, Kentaro & Sato, Kiyotaka, 2021. "A new assessment of economic integration in East Asia: Application of an industry-specific G-PPP model," Japan and the World Economy, Elsevier, vol. 60(C).
    16. Lodge, David & Pérez, Javier J. & Albrizio, Silvia & Everett, Mary & De Bandt, Olivier & Georgiadis, Georgios & Ca' Zorzi, Michele & Lastauskas, Povilas & Carluccio, Juan & Parraga Rodriguez, Susana &, 2021. "The implications of globalisation for the ECB monetary policy strategy," Occasional Paper Series 263, European Central Bank.
    17. Yushi YOSHIDA & Yuri SASAKI, 2015. "Automobile Exports: Export price and retail price," Discussion papers 15024, Research Institute of Economy, Trade and Industry (RIETI).
    18. Corbo, Vesna & Di Casola, Paola, 2022. "Drivers of consumer prices and exchange rates in small open economies," Journal of International Money and Finance, Elsevier, vol. 122(C).
    19. Hadrien Camatte & Guillaume Daudin & Violaine Faubert & Antoine Lalliard & Christine Rifflart, 2021. "Global value chains and the transmission of exchange rate shocks to consumer prices," Working Papers hal-03374355, HAL.
    20. Shah, Sayar Ahmad & Garg, Bhavesh, 2026. "Dynamics of exchange rate pass-through: The role of pricing strategies and economic shocks," Economic Modelling, Elsevier, vol. 154(C).

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

    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:23013. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.