Beschreibung:
We investigate how exchange rates affect the Japanese chemical industry. This industry exports sophisticated products to downstream firms. 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 chemical goods. We also find that stock returns of chemical firms linked to commoditized industries decrease when the yen appreciates. These results indicate that exporting sophisticated products can reduce export and profit volatility arising from exchange rate swings