Sophistication Measure Method Based On The Network Diagram And The Empirical Research On Influence Of The Sophistication On The Real Exchange Rate

Based on the review and analysis of the existing sophistication measure method, this paper proposes a new sophistication measure method by constructing the product space network diagram. Using1976to2000the world trade data, we construct the network diagram of the world product space, and analyze the correlation between the various trade products in the world. At the same time, with the knowledge of the graph theory, we estimate the sophistication of the various types of trade products, and further measure out each country’s sophistication. Through comparing our measure method and the original measure method, we find that the two kinds of measure method roughly have the same effect on the characterization of the sophistication of the products and the empirical analysis.Meanwhile, previous researches on trade and exchange rate mainly focused on the relation between the exchange rate change and the trade balance or the trade structure. But little attention is paid to the relation between the level of trade technology and exchange rate. For the research questions, this paper uses the trade and real exchange rate data of the world’s trade countries in1976-2010and researches on the relation between the exchange rate and the sophistication. We set up the econometric model and do an empirical analysis of the relationship between the trade sophistication and the real exchange rate. Empirical analysis finds that the sophistication has a positive role in promoting appreciation of the real exchange rate long-term via variable coefficient panel data model. The VAR model analysis of the three countries of China, Japan and Canada, researches the impact of the sophistication on the real exchange rate in the short term...