Industry-specific Real Effective Exchange Rates in Asia

Author Name SATO Kiyotaka  (Yokohama National University) /SHIMIZU Junko  (Gakushuin University) /Nagendra SHRESTHA  (Yokohama National University) /Shajuan ZHANG  (Yokohama National University)
Creation Date/NO. March 2015 15-E-036
Research Project Research on Currency Baskets
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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.