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Abenomics’ Trade Spillover

Author

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  • Benno Ferrarini

    (Asian Development Bank)

Abstract

There is no escaping Japan’s competition in the world markets for goods, particularly in the automotive and electronics industries. Countries exporting to these markets are bound to feel the competitive pressure from a marked fall in the value of the yen. However, while some exporters will be hurt by a cheaper yen, others will benefit from lower input costs, to the extent that they source parts and components from Japan for processing, assembly, and reexport. This paper formalizes these intuitions and tests them against a data set covering more than 90% of world trade at the product level, between 2000 and 2011. Panel regression analysis shows that for countries and products facing Japan’s strongest competition, a 10% appreciation of the yen lowers average exports by more than 3%, which is a sizeable pass through. Elsewhere, the impact is negligible, particularly when vertical trade is accounted for.

Suggested Citation

  • Benno Ferrarini, 2013. "Abenomics’ Trade Spillover," ADB Economics Working Paper Series 379, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0379
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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