Exchange Rate Appreciation and Export Price Competitiveness: Industry-specific real effective exchange rates of Japan, Korea, and China

Kiyotaka Sato, Junko Shimizu, Nagendra Shrestha and Shajuan Zhang

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

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.

Pages: 33 pages
Date: 2013-04
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:13032

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