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Abenomics’ Trade Spillover

  • Ferrarini , Benno

    (Asian Development Bank)

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    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.

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    File URL: http://www.adb.org/sites/default/files/pub/2013/ewp-379.pdf
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    Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 379.

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    Length: 26 pages
    Date of creation: 23 Oct 2013
    Date of revision:
    Handle: RePEc:ris:adbewp:0379
    Note: http://www.adb.org/sites/default/files/pub/2013/ewp-379.pdf
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    1. Feenstra, Robert & Luck, Philip & Obstfeld, Maurice & Russ, Katheryn N., 2014. "In Search of the Armington Elasticity," CEPR Discussion Papers 9951, C.E.P.R. Discussion Papers.
    2. Guillaume Gaulier & Soledad Zignago, 2010. "BACI: International Trade Database at the Product-Level. The 1994-2007 Version," Working Papers 2010-23, CEPII research center.
    3. Finger, J M & Kreinin, M E, 1979. "A Measure of 'Export Similarity' and Its Possible Uses," Economic Journal, Royal Economic Society, vol. 89(356), pages 905-12, December.
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