Global Economy Journal
The Official Publication of the International Trade and Finance Association
Ed. by Pelzman, Joseph
CiteScore 2018: 0.33
SCImago Journal Rank (SJR) 2018: 0.157
Source Normalized Impact per Paper (SNIP) 2018: 0.402
Exchange-Rate Volatility and Industry Trade Between Japan and China
Exchange-rate risk is often thought to reduce international trade flows, but numerous theoretical and empirical analyses have pointed toward positive as well as negative effects. This is particularly true when bilateral trade flows for individual industries are estimated. In this study, we extend the literature to the case of Japanese trade with China for 110 import industries and 95 export industries. Aggregate Japanese exports, but not imports, respond to real exchange rate volatility in the long run, while most individual export and import industries respond in the short run. Although many individual Japanese import industries are affected in the long run by risk, mostly negatively, this is even more the case for exporters. A larger proportion of Japanese export industries are affected by exchange rate uncertainty for most industry sectors. Manufacturing exports are particularly vulnerable to this risk, with a large share responding negatively to increased volatility.