Asian Economic Journal

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• Individual tourist expenditures in Japan during the inbound tourism boom period (2015–2017): Empirical evidence from micro survey data

  This study empirically examines the characteristics of demand generated by inbound tourism (inbound demand) in Japan in the 2010s using individual data from the Consumption Trend Survey for Foreigners Visiting Japan. This is the first study to investigate the detailed characteristics of inbound consumption during Japan's inbound boom period using individual micro survey data. One of the main findings is that household income and the exchange rate significantly affect inbound demand. This is especially true for inbound demand by visitors from Asian countries, whose main purpose for visiting Japan is shopping. Another main finding is that visa relaxation effectively increases the number of tourists from China. The third finding is that the payment environment in Japan, including the use of credit cards, has a significant impact on inbound demand. These findings provide an in‐depth insight into inbound demand as a potential engine for future economic growth in Japan.

• Does outward foreign direct investment improve the performance of domestic firms? Case of Korea

  In this article, we use firm‐level data in Korea from 2010 to 2019 to analyze whether outward foreign direct investment (OFDI) affects the productivity of domestic firms, known as reverse knowledge spillovers. Using propensity score matching and difference‐in‐difference regressions, we verify that OFDI improves the productivity of parent companies. Considering the characteristics of OFDI and the parent company, these positive effects become greater when (1) parent company's absorptive capacity (technology level) is high, (2) OFDI is in the M&A form, and (3) OFDI is toward developed countries. In addition to these direct effects, we investigate whether OFDI improves the productivity of other domestic firms within and across industries, known as horizontal and vertical spillovers. The results demonstrate strong evidence of positive vertical spillovers but not horizontal spillovers. These evidence provide important policy implications about the specifics of outward direct investment that are beneficial to capital‐exporting countries.

• Income volatility in adolescence and university enrollment: The case of South Korea

  This study examines the relationship between parental income volatility and children's university enrollment. It measures parental income instability using the following indicators: (1) transitory income volatility, (2) standard deviation of the arc percent change, and (3) coefficient of variation. These metrics are derived from the total household income data collected from the child's first year of middle school through the third year of high school. Additionally, this study investigates the impact of income trends by analyzing the regression coefficient obtained by regressing total household income against the father's age. An investigation of individuals born between 1986 and 1998, who graduated from general high school, reveals an negative correlation between parental income instability/trends and the likelihood of children enrolling in a 4‐year university. However, this correlation is only statistically significant for low‐income households. These findings imply that despite similar average income levels, households with high income volatility in the lower‐income group are less likely to make adequate educational investments in their children.

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• The synchronization between Korea's and Japan's business cycles

  This article analyzes the evolution of the dynamic interactions between Korea's and Japan's business cycles. The logarithmic industrial production is first decomposed into trends and cycles using bounceback models. The estimation results of the two‐state Markov switching model show that the synchronization coefficient of Korea–Japan is positive and time‐varying. However, according to the estimation results of the heteroscedasticity‐based VAR model, the Japanese business cycle shock has a positive effect on the contemporaneous Korean business cycle, but not vice versa. Based on these results, I estimate a TVP‐VAR model assuming Cholesky decomposition and find that Japanese upward shocks do not have positive impacts on the Korean business cycle in the period before the global financial crisis or the period after the global financial crisis and before the COVID‐19 outbreak. The response of Korea to the Japanese shock is smaller in the three‐variable TVP‐VAR compared to the two‐variable TVP‐VAR without the United States. The Korean business cycle upward shock also has a similar effect on the Japanese business cycle, albeit smaller, depending on the period. Overall, the size of the response seems to be closely related to global events as well as changes in trade, FDI, and political conditions between two countries.

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• Exchange rate effects on China's exports: Product sophistication and exchange rate elasticity

  The negative effect of a currency appreciation on a country's exports may be attenuated as its export basket becomes more sophisticated. This paper investigates whether exchange rate changes affect China's exports differently depending on their sophistication levels, as measured by the Product Complexity Index (PCI). We estimate exchange rate elasticities for 1242 export categories disaggregated at the HS‐4‐digit level from 1995 to 2018 using bilateral trade data between China and 190 partner economies. Results indicate that exchange rate fluctuations have negative effects on China's export values, and exchange rate effects are less for more sophisticated exports. This decreasing of exchange rate elasticities for more sophisticated exports holds even when controlling for tariffs. The evidence also shows that, as China has upgraded its export basket over time, the impact of exchange rates on exports has become smaller and less significant. Moreover, the effect of exchange rate related policies on export values via the exchange rate is smaller and less significant for China's more sophisticated exports.

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