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Industry-specific Real Effective Exchange Rates in Asia

Author

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  • SATO Kiyotaka
  • SHIMIZU Junko
  • Nagendra SHRESTHA
  • Shajuan ZHANG

Abstract

This study constructs a monthly series of industry-specific real effective exchange rates (I-REERs) based on the producer price indices of nine Asian economies from 2001 to 2014. To check the usefulness of the I-REERs as a measurement of international price competitiveness, we calculated the aggregated I-REER (Avg-I-REER) and compared it with the REER published by the Bank for International Settlements (BIS-REER). We found that in some Asian economies, the Avg-I-REER exhibited different movements from the BIS-REER due to the differences in the underlying prices and weights used for the data construction. We also conducted a panel analysis to investigate the effect of both the Avg-I-REER and BIS-REER on real exports in the nine Asian economies. It was revealed that an appreciation of the Avg-I-REER has a negative and significant impact on real exports, whereas that of the BIS-REER has a positive and insignificant influence on real exports. Even the "aggregated" I-REER shows a greater advantage when used for measuring the export price competitiveness relative to the conventional REERs.

Suggested Citation

  • SATO Kiyotaka & SHIMIZU Junko & Nagendra SHRESTHA & Shajuan ZHANG, 2015. "Industry-specific Real Effective Exchange Rates in Asia," Discussion papers 15036, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:15036
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    References listed on IDEAS

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    1. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," Notas Económicas, Faculty of Economics, University of Coimbra, issue 30, pages 6-28, December.
    2. SATO Kiyotaka & SHIMIZU Junko & Nagendra SHRESTHA & Shajuan ZHANG, 2013. "Exchange Rate Appreciation and Export Price Competitiveness: Industry-specific real effective exchange rates of Japan, Korea, and China," Discussion papers 13032, Research Institute of Economy, Trade and Industry (RIETI).
    3. Linda S. Goldberg, 2004. "Industry-specific exchange rates for the United States," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 1-16.
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    Cited by:

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    2. Silvia Fabiani & Alberto Felettigh & Claire Giordano & Roberto Torrini, 2019. "Making room for new competitors. A comparative perspective on Italy’s exports in the euro-area market," Questioni di Economia e Finanza (Occasional Papers) 530, Bank of Italy, Economic Research and International Relations Area.
    3. Ansgar Belke & Ulrich Volz, 2020. "The Yen Exchange Rate and the Hollowing Out of the Japanese Industry," Open Economies Review, Springer, vol. 31(2), pages 371-406, April.
    4. 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).
    5. Nishiyama, Hiroyuki, 2017. "The effect of exchange rate fluctuation on intra-industry reallocation in a firm heterogeneity model with trade and foreign direct investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 32-43.
    6. Matteo Bugamelli & Silvia Fabiani & Stefano Federico & Alberto Felettigh & Claire Giordano & Andrea Linarello, 2018. "Back on Track? A Macro–Micro Narrative of Italian Exports," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 1-31, March.
    7. Gloria Allione & Alberto Felettigh, 2021. "External demand and export performance: regression residuals during the Covid-19 pandemic," Questioni di Economia e Finanza (Occasional Papers) 643, Bank of Italy, Economic Research and International Relations Area.
    8. Hyelin Choi & Hyo Sang Kim, 2020. "Exchange Rates and Firm Exports: The Role of Foreign Ownership and Foreign Subsidiaries," Asian Economic Papers, MIT Press, vol. 19(2), pages 103-118, Summer.
    9. Thorbecke, Willem & Kato, Atsuyuki, 2018. "Exchange rates and the Swiss economy," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1182-1199.
    10. Kiyotaka Sato & Robert Stehrer, 2015. "New Industry-level Analysis on Value Chains and Competitiveness in Asia and Europe: Introduction," Asian Economic Journal, East Asian Economic Association, vol. 29(2), pages 93-97, June.
    11. Rebecca Neumann & Saleh S. Tabrizy, 2021. "Exchange Rates and Trade Balances: Effects of Intra-Industry Trade and Vertical Specialization," Open Economies Review, Springer, vol. 32(3), pages 613-647, July.

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