Coping with the rising yen: Japan's recent export experience

Despite an appreciating yen, Japanese firms have managed to maintain strong export sales growth during the first half of the 1990s. Their strategies? Cutting the yen price of exports and shifting production to higher-value merchandise.Exports ; Japan ; Foreign exchange rates

Space age monetary theory

Monetary theory

Exchange rates and profit margins: the case of Japanese exporters

When exchange rates shift, exporters must decide whether it is more important to maintain profit margins or to maintain stable export prices. This examination of Japanese exporters finds that these firms have taken a middle course: By altering their profit margins to some degree, the exporters moderate the exchange-rate-induced changes in prices seen by their foreign customers. The analysis finds that in the three major exporting industries - industrial machinery, electrical machinery, and transportation equipment - a 10 percent rise in the yen leads firms to lower profit margins on exports by 4 percent relative to the margins on their sales in Japan. That is, the exporters pass on more than half of any change in the yen to the price seen by their foreign customers and absorb the remainder by adjusting profit margins on foreign sales.Foreign exchange rates - Japan ; Exports ; Prices ; Japan

HOW GOVERNMENTS RESPOND TO BUSINESS DEMANDS FOR TAX CUTS: AN ANALYSIS OF CORPORATE AND INHERITANCE TAX REFORMS IN AUSTRIA AND SWEDEN. CES Open Forum Series 2018-2019

This paper analyses government responsiveness to business demands for tax cuts, using case studies of reforms of corporate taxes and inheritance taxes in Austria and Sweden. We find a high level of government responsiveness in both policy fields, but much higher responsiveness on inheritance tax. We argue that this difference between the two policy fields is the result of an effort by governments to balance three conflicting goals: (i) attracting investments, (ii) maintaining a high level of tax revenues, (iii) and maintaining electoral popularity. The intensity of these goal conflicts varied between the two policy fields. It was higher on corporate taxation, which led governments to combine cuts to corporate tax with compensatory measures, the abolition of inheritance tax in both countries was not combined with compensatory measures, because goal conflicts were low. We show that differences in the expected electoral and fiscal impacts of reforms explain the different levels of government responsiveness. Government efforts to reconcile the three policy goals under conditions of heightened business power entailed sacrificing redistributive goals that have characterized tax policies in earlier periods.

Lowering electricity prices through deregulation

A wave of regulatory reform is now transforming the U.S. electricity industry. As state and federal authorities allow independent power producers to compete with utilities in supplying electricity, consumers are paying close attention to the effects of this change on their energy bills. Although deregulation poses significant structural challenges, the introduction of competitive pressures should ultimately lead to efficiency gains for the industry and cost savings for households and businesses.Electric utilities ; Prices

Viewing the current account deficit as a capital inflow

With the 1998 current account deficit approaching $225 billion, attention is again focusing on the deficit's impact on U.S. jobs. Although a high deficit does adversely affect employment in export- and import-competing industries, it also means that considerable foreign capital is flowing into the United States, supporting domestic investment spending that stimulates growth and creates jobs.Balance of trade ; Capital movements ; Capital investments ; Investments ; Employment (Economic theory)

The growing U.S. trade imbalance with China

Over the past decade, the United States has gone from enjoying a small trade surplus with China to grappling with an enormous deficit. Just to keep the gap from expanding in 1997, U.S. exports to China would need to grow at an extraordinary rate--four times as fast as Chinese exports to the United States. Despite recent gains and China's efforts at trade liberalization, growth on that order appears unlikely, and the deficit can be expected to widen in the near term.Balance of trade ; China

Asia's trade performance after the currency crisis

The Asian countries hit by the 1997-98 currency crisis experienced a sharp reversal of capital flows that forced their current account balances to move from deficit to surplus. This study of the trade flows of Indonesia, Malaysia, South Korea, and Thailand finds that steep declines in imports, measured in dollar terms, accounted for almost all of the improvements in current account balances. However, a fuller picture emerges when the authors analyze the trade flows according to the volume of goods being shipped and the prices of these goods. The analysis shows that several factors contributed to the current account adjustment: higher export volumes in response to increased foreign demand outside of Asia, lower dollar import prices in line with declining world export prices, and the collapse in import volumes due to sharp declines in domestic economic activity.Balance of trade ; International trade - Asia ; Asia

Financial globalization and the U.S. current account deficit

Despite heavy borrowing in recent years, the United States has financed its large current account deficits without experiencing an unusual buildup in foreign investors' holdings of U.S. assets. A new analysis suggests that this somewhat surprising development is attributable largely to rapid financial globalization, with cross-border flows worldwide rising as fast as flows into the United States. However, it could be harder for the country to sustain large deficits on favorable terms if the current wave of globalization subsided or the rate at which U.S. investors buy foreign assets increased.

Reserve accumulation: implications for global capital flows and financial markets

Many central banks-particularly those in Japan and the emerging Asian nations-have been building up their holdings of foreign currency assets. These holdings, known as foreign exchange reserves, may help countries stabilize their currencies, but they can also lead to investment losses for the central banks. The large share of dollar assets among reserve holdings has made foreign central banks important players in U.S. financial markets.Banks and banking, Central ; Bank reserves ; Banks and banking - Asia