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Large real exchange rate movements, firm dynamics, and productivity growth

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Author Info
Loretta Fung

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Abstract

This paper examines the influence of large real exchange rate movements on firm turnover and production scale, and the contribution of these decisions to productivity growth. Our theoretical model predicts that home currency appreciations cause firm closure and reduce surviving firms' exports while boosting domestic sales. The net effect on sales and productivity therefore depends on changes in domestic sales and exports. Taiwanese firm-level data are used to test these predictions. The results show that real currency appreciations lead to scale expansion of surviving firms which in turn raises productivity. Our findings suggest the existence of a significant scale effect.

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File URL: http://economics.ca/cgi/xms?jab=v41n2/CJEv41n2p0391.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 2 (May)
Pages: 391-424
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Handle: RePEc:cje:issued:v:41:y:2008:i:2:p:391-424

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Keywords:

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Albert Park & Dean Yang & Xinzheng Shi & Yuan Jiang, 2006. "Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis," Working Papers 549, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  2. Ekholm, Karolina & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2008. "Manufacturing restructuring and the role of Real exchange rate shocks: A firm level analysis," CEPR Discussion Papers 6904, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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This page was last updated on 2009-11-25.

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