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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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  • Exchange rate appreciation and export price competitiveness
  • Sato, Kiyotaka; Shimizu, Junko; Shrestha, Nagendra; Zhang, Shajuan
  • Research Institute of Economy, Trade and Industry


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Title Exchange rate appreciation and export price competitiveness
Similar Titles
Sub Title

Industry-specific real effective exchange rates of Japan, Korea, and China

Material Type Reports
Author(English)

Sato, Kiyotaka; Shimizu, Junko; Shrestha, Nagendra; Zhang, Shajuan

Publisher

[Tokyo, Japan] : Research Institute of Economy, Trade and Industry

Date 2013-04
Series Title; No RIETI discussion paper series / 13-E-032
Pages 33
Subject Country China(Asia and Pacific)
Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Holding Research Institute of Economy, Trade and Industry
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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.