Product Complexity, Exports, and Exchange Rates: Evidence from the Japanese Chemical Industry

Willem Thorbecke, Nimesh Salike () and Chen Chen

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We investigate how exchange rates affect the Japanese chemical industry. Focusing on exports in a single industry from a single country reduces the influence of other factors that could cloud inference. We find that stock returns of firms linked to commoditized industries decrease when the yen appreciates. Also, since more complex products are less substitutable in international trade, we investigate whether they have lower price elasticities. We measure complexity using Hausmann and Hidalgo's (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results suggest that exporting sophisticated products could reduce export and profit volatility arising from exchange rate swings.

Pages: 28 pages
Date: 2020-11
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:20085

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