Effects of exchange rate changes on East Asian technology-intensive exports

Abstract

This paper examines effects of exchange rate changes on technology-intensive exports for five Northeast Asian economies: China, Hong Kong, Japan, Republic of Korea (ROK) and Taiwan. In these economies, China, Hong Kong and Taiwan have increased the shares of high-skill and technology-intensive exports (usually finished goods) while Japan has highly concentrated on medium-skill and technology-intensive exports (mainly intermediate goods). ROK has shifted its exports from finished to intermediate goods following Japan. Panel dynamic Ordinary Least Squares (OLS) with heterogeneous time trends was applied to trade data during the period 1995–2011. Our estimation results revealed that exports with high skill and technology intensity are more sensitive to real exchange rates in China and Taiwan, while exports with medium skill and technology intensity are very sensitive to exchange rate changes except for China. These results are consistent with the current roles of those economies in the regional production networks.