Econometric Analysis on the Effects of Exchange Rate Fluctuation on Internal-External Price Differentials

As the last year of the three-year project, we concentrated on the following three research topics: 1) Analysis on corporate firm's pricing behavior In the era of globalization 2) International comparison of factors which determine internal-external price differentials by using the data of International Comparison of Prices (ICP), and 3) Analysis on regulatory and politico-economic factors generating internal-external price differentials. As for 1), we constructed questionnaire-level micro database of foreign affiliates of Japanese firms and connected the data of intra-firm trade. We now foreign affiliates of Japanese firms and connected the data of intra-firm trade. We now have to face a difficult problem in connecting commodity price data with the database. However, we can report our preliminary result on this issue soon. As for 2), again we had to spend huge amount of time in data matching and cleaning. However, we wrote up a paper titled "The Measurement of Tariff Equivalents of Nontariff Barriers by Using ICP Data: Preliminary Results" and are now preparing for publication. As for 3), on the contrary to general perception that the internal-external price differential problem is passe in the deflationary economy, we found a number of sectors which have not solved fundamental problems. We will write up a policy-oriented paper in the near future.