Modern paradigm of exports sophistication: determinants and models in Japanese case

Abstract

Export determinants and their interconnection with technological sophistication and exchange rates are a popular topic in foreign articles. This paper is devoted to relation between export sophistication and exchange rate, including disaggregation of the used data to the country level. Main hypothesis of the research can be formulated as follows: export sophistication moderates the influence of exchange rate risks on export volume. First of all, analytical review of literature over the period of 2009–2019 has been carried out. It includes such topics as influence of trade policy on wages and employment in developing countries, main determinants of export diversification, role of foreign direct investments in export sophistication, etc. Furthermore, articles devoted to experience of China, Korea, Singapore, Japan, ASEAN and Latin America countries have been studied. Second part of the research focuses on statistical and regression analysis of Japanese export partners’ data, and also evaluation of ESI and PSI according to R. Hausmann methodology. Moreover, three clusters of countries were outlined: first — the leader — the USA, second — countries with growing exports — China and Korea, third — other countries. The structure of Japanese exports inclines the focus on high and middle-high technological goods. This trend is more evident in case of ESI and PSI: middle and high technological goods retain minimal fluctuations in volumes since 2014. Finally, regression coefficients indicate that yen deflation stimulates export, this result can be explained by Japanese policy of division between internal and external markets.