The impact of exchange rate changes on the Japanese chemical industry

Willem Thorbecke, Nimesh Salike and Chen Chen

Japan and the World Economy, 2022, vol. 62, issue C

Abstract: We investigate how exchange rates affect the Japanese chemical industry. This industry exports sophisticated products to downstream firms. Since more complex products are less substitutable in international trade, we investigate whether they have lower price elasticities. We measure complexity using Hidalgo and Hausmann’s (2009) product complexity index. We find that price elasticities are lower for more complex chemical goods. We also find that stock returns of chemical firms that occupy vital niches in the world economy are harmed less by yen appreciations. These results indicate that exporting sophisticated products can reduce export volatility and profit volatility arising from exchange rate swings.

Keywords: Japan; Chemical industry; Exchange rate elasticities; Exchange rate exposure; Product complexity index (search for similar items in EconPapers)
JEL-codes: F10 F14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:62:y:2022:i:c:s0922142522000202

DOI: 10.1016/j.japwor.2022.101135

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