Exchange Rate Volatility and MNCs' Production and Distribution Networks: The Case of Japanese Manufacturing MNCs

The Singapore Economic Review, Vol. 53, No. 3, pp. 523-538, 2008

Posted: 6 May 2010

See all articles by Kozo Kiyota

Kozo Kiyota

Keio University - Keio Economic Observatory

Shujiro Urata

Waseda University-Graduate School of Asia-Pacific Studies

Date Written: December 1, 2008

Abstract

This paper empirically examines the impacts of exchange rate volatility on the location choice by Japanese multinational corporations (MNCs) and their intra-firm trade. We use affiliate-level data for Japanese MNCs for 1995, 1998 and 2001. We found that high exchange rate volatility discourages the establishment of an affiliate by MNCs. Moreover, the high exchange rate volatility causes the shift from inter-firm to intra-firm transactions. These findings imply the importance of maintaining a stable exchange rate environment in order for MNCs to expand their production and distribution networks.

Keywords: Exchange rate volatility, location choice, intra-firm trade

Suggested Citation

Kiyota, Kozo and Urata, Shujiro, Exchange Rate Volatility and MNCs' Production and Distribution Networks: The Case of Japanese Manufacturing MNCs (December 1, 2008). The Singapore Economic Review, Vol. 53, No. 3, pp. 523-538, 2008. Available at SSRN: https://ssrn.com/abstract=1503780

Kozo Kiyota

Keio University - Keio Economic Observatory ( email )

Mita 2-15-45, Minato-ku
Tokyo, 108-8345
Japan

Shujiro Urata (Contact Author)

Waseda University-Graduate School of Asia-Pacific Studies ( email )

1-21-1 Nishiwaseda
Shinjuku-ku, Tokyo 169-8050
Japan

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