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Industry‐specific Real Effective Exchange Rates and Export Price Competitiveness: The Cases of J apan, C hina, and K orea
Author(s) -
Sato Kiyotaka,
Shimizu Junko,
Shrestha Nagendra,
Zhang Shajuan
Publication year - 2013
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/aepr.12032
Subject(s) - exchange rate , economics , order (exchange) , production (economics) , vector autoregression , investment (military) , monetary economics , industrial organization , microeconomics , finance , politics , political science , law
This paper constructs a new dataset of the industry‐specific real effective exchange rate, based on the producer price indices, for J apan, C hina, and K orea on a monthly basis from J anuary 2001 to F ebruary 2013 in order to provide a better indicator for export price competitiveness. By conducting simulation analysis, we found that K orean electrical machinery firms substantially improved their cost competitiveness by lowering their production costs during the Korean won appreciation period, while Japanese firms' large plant investment caused by management misjudgments led to excessive production capacity, which resulted in the deterioration of Japanese export competitiveness. A structural vector autoregression analysis also reveals that industry differences of cost competitiveness as well as nominal exchange rate changes have significant impact on export performances of J apan and K orea.