Yushi Yoshida

Exchange Rate Movements and Tradable Goods Prices in East Asia: An Analysis Based on Japanese Customs Data, 1988-98

This paper uses a dynamic panel data model to estimate the pass-through coefficients of 20 nine-digit industrial commodities that are traded between Japan and its East Asian and industrial country trading partners. By using the monthly series of unit export and import values obtained from the Japanese customs data for the period 1988-99, it shows that price pass-through is much larger for Japanese exports than for Japanese imports, suggesting that the yen prices of Japanese imports do not fall (rise) very much when the yen appreciates (depreciates), whereas the prices of Japanese exports rise (fall) considerably in the buyers currency. With the notable exception of some imports from Malaysia, the degree of price pass-through was not qualitatively affected by the Asian currency crisis of 1997.

An Empirical Examination of Export Variety: Regional Heterogeneity within a Nation

Recognising that similar goods are produced in different subregions within a country, we offer new evidence of variety expansion in a nations exports. We divide Japanese national exports into 41 prefectural subregions with over 7,000 product categories and construct subregional export margins for the years between 1988 and 2005. First, we find strong evidence of regional heterogeneity in terms of export product coverage, and the export variety of most regions expands in our sample period. Second, we find that the extensive margin accounts for over 60 per cent of the increase in exports of larger subregions, similar to the findings in the international cross-country study. These findings imply that accounting for export variety in terms of new exports from subregions within a country strengthens the contribution of extensive margin in the growth of exports.

Stock Market Linkage between Asia and the United States in Two Crises: Smooth-Transition Correlation VAR-GARCH Approach

We investigate whether or not the effects of the subprime financial crisis on 12 Asian economies are similar to those of the Asian financial crisis by examining volatility spillovers and time-varying correlation between the US and Asian stock markets. After pretesting volatility causality and constancy of correlation, we estimate an appropriate smooth-transition correlation VAR-GARCH model for each Asian stock market. First, the empirical evidence indicates stark differences in stock market linkages between the two crises. The volatility causality comes from the crises-originating country. Volatility in Asian stock markets Granger-caused volatility in the US market during the Asian crisis, whereas volatility in the US stock market Granger-caused volatility in Asian stock markets during the subprime crisis. Second, decreased correlations during the period of financial turmoil were observed, especially during the Asian financial crisis. Third, the estimated points of transition in the correlation are indicative of market participants’ awareness of the ensuing stock market crashes in July 1997 and in September 2008.

Exchange Rate Movements and Tradable Goods Prices in East Asia

This paper uses a dynamic panel data model to estimate the pass-through coefficients of 20 nine-digit industrial commodities that are traded between Japan and its East Asian and industrial country trading partners. By using the monthly series of unit export and import values obtained from the Japanese customs data for the period 1988–99, it shows that price pass-through is much larger for Japanese exports than for Japanese imports, suggesting that the yen prices of Japanese imports do not fall (rise) very much when the yen appreciates (depreciates), whereas the prices of Japanese exports rise (fall) considerably in the buyer’s currency. With the notable exception of some imports from Malaysia, the degree of price pass-through was not qualitatively affected by the Asian currency crisis of 1997. [JEL F14, F32]

We Missed It Again! Why Do So Many Market Orders in High-Frequency FX Trading Fail to be Executed?

The cancellation/revision rates in the Electronic Broking System (EBS) foreign exchange (FX) markets have dramatically increased as FX traders have relied more on algorithm trading in recent years. As an unintended consequence, market orders that were intended to be executed instantly with the best existing quotes in the market have experienced an increased likelihood of not being executed. Across various currency pairs in 2010, the failure rate of market orders was approximately 60%. This high rate of market-order execution failures cannot be observed in 2003–2004. By fully examining the EBS order-by-order database, we provide vivid illustrations of behaviors observed in limit orders and market orders at high frequency. We find evidence that market orders in the EBS FX markets fail to be executed because (1) turnover of orders is too fast for a market order to hit a moving target and (2) market orders are not only being used in the traditional sense in which a trader is promised an immediate transaction but also being used for strategic trading.

Algorithm Trading in Asian Currency FX Markets

We investigate a unique EBS foreign exchange dataset that provides each individual order a distinct ID number with a time stamp on entry and another time stamp on exit. Using this dataset for the Australian dollar and the Japanese yen, we measure how long an individual limit order remains in the foreign exchange markets. A large number of limit orders are canceled within a split second, which is evidence for algorithmic trading in the foreign exchange market. While more than 80% of limit orders are canceled in the JPY/USD spot market, the cancelation rates are even higher in the JPY/AUD and AUD/USD spot markets. At the minute frequency, we find weak evidence of correlated cancelation activities among three spot markets. We conclude that the cross-rate JPY/AUD market is characterized by a mixture of algorithm trading and triangular arbitrage trading.

Where at home do exporters produce and export

Foreign growth can induce changes in production structures across domestic regions through international trade. With a two†country model with the explicit incorporation of two regions in the home country, we show that effects of foreign growth on exports and production to be possibly asymmetric among home regions. This foreign†growth effect is especially prominent in Asia with China emerging as the largest trading country. We empirically test our theoretical hypothesis with the data set of Japanese regions. We find evidence that the growth of Asian countries leads to a change in the regional structure of exports and production in Japan. With respect to an adjacent Asian country, the growth of a foreign country exerts opposite effects on production among Japanese regions.

Regional Integration and Risk Management of African Stock Markets

Abstract We examine how the degree of regional financial integration in African stock markets has evolved over the last eleven years. Despite increasing regional economic cooperation, the process of stock market integration has been slow. To facilitate growth via developed financial markets but keep financial stability risk at a minimum, further regional integration should be promoted, and mild capital controls on non-African investors may be necessary. A Diebold-Yilmaz spillover analysis is applied to ten African stock markets for the period between August 2004 and January 2015. We examine spillovers among four regions and among individual countries. Regional integration, as measured by total spillovers in Africa, is increasing but remains very low. These spillovers were temporarily heightened during the global financial crisis. Cross-regional spillovers are high between Northern and Southern Africa. Asymmetric capital controls on African and non-African investors must be considered to foster further regional integration and to mitigate financial stability risk. This is one of the few studies to address the construction of the future architecture of regionally integrated stock markets in emerging countries.