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New empirical assessment of export price competitiveness: Industry-specific real effective exchange rates in Asia

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

Abstract

This study constructed the industry-specific real effective exchange rate (I-REER) as a new measure of export competitiveness by industry. By aggregating I-REERs to a country-level I-REER for nine Asian economies, we assess the effect of REER appreciation on real exports by employing both static common-correlated effects (CCE) estimator and cross-sectionally augmented distributed lag (CS-DL) estimator (a dynamic version of the CCE estimator) to control for heterogeneity in the impact of unobservable common factors. The degree of REER’s negative effect is found to have declined in recent years, which may imply that growing global value chains (GVCs) tend to mitigate the negative effect of REER appreciation on exports. As is well known that Asia is characterized as active regional trade and investment through GVCs, further regional integration would make Asian economies have less concern about policy coordination for regional exchange rate stability in Asia.

Suggested Citation

  • Sato, Kiyotaka & Shimizu, Junko & Shrestha, Nagendra & Zhang, Shajuan, 2020. "New empirical assessment of export price competitiveness: Industry-specific real effective exchange rates in Asia," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940820301595
    DOI: 10.1016/j.najef.2020.101262
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    Cited by:

    1. Kawasaki, Kentaro & Sato, Kiyotaka, 2021. "A new assessment of economic integration in East Asia: Application of an industry-specific G-PPP model," Japan and the World Economy, Elsevier, vol. 60(C).
    2. Kosuke Aoki & Yoshihiko Hogen & Yojiro Ito & Kenji Kanai & Kosuke Takatomi, 2024. "Determinants of Price Markups at Japanese Firms and Implications for Productivity," Bank of Japan Working Paper Series 24-E-15, Bank of Japan.
    3. Yoshihiko Hogen & Yojiro Ito & Kenji Kanai & Naoya Kishi, 2024. "Changes in the Global Economic Landscape and Issues for Japan's Economy," Bank of Japan Working Paper Series 24-E-3, Bank of Japan.

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    More about this item

    Keywords

    Industry-specific real effective exchange rate (I-REER); Export price competitiveness; Panel auto-regressive distributed lag (ARDL) model; Heterogeneous cross-sectional dependence; global value chain (GVC); Asia;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F15 - International Economics - - Trade - - - Economic Integration

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