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Product Complexity, Exports, and Exchange Rates: Evidence from the Japanese Chemical Industry

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  • Willem THORBECKE
  • Nimesh SALIKE
  • CHEN Chen

Abstract

We investigate how exchange rates affect the Japanese chemical industry. Focusing on exports in a single industry from a single country reduces the influence of other factors that could cloud inference. We find that stock returns of firms linked to commoditized industries decrease when the yen appreciates. Also, since more complex products are less substitutable in international trade, we investigate whether they have lower price elasticities. We measure complexity using Hausmann and Hidalgo's (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results suggest that exporting sophisticated products could reduce export and profit volatility arising from exchange rate swings.

Suggested Citation

  • Willem THORBECKE & Nimesh SALIKE & CHEN Chen, 2020. "Product Complexity, Exports, and Exchange Rates: Evidence from the Japanese Chemical Industry," Discussion papers 20085, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:20085
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    References listed on IDEAS

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    Cited by:

    1. Willem THORBECKE, 2022. "Investigating How Exchange Rates Affected the Japanese Economy after the Advent of Abenomics," Discussion papers 22003, Research Institute of Economy, Trade and Industry (RIETI).

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