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Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?

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  • Demir, Firat

Abstract

Employing a firm-level dataset, this paper explores the effects of exchange rate volatility on the growth performances of domestic versus foreign, and publicly traded versus non-traded private manufacturing firms in a major developing country, Turkey. The empirical results using dynamic panel data estimation techniques and comprehensive robustness tests suggest that exchange rate volatility has a significant growth reducing effect on manufacturing firms. However, having access to foreign, and to a lesser degree, domestic equity markets is found to reduce these negative effects at significant levels. These findings continue to hold after controlling for firm heterogeneity due to differences in export orientation, external indebtedness, profitability, productivity, size, industrial characteristics, and time-variant institutional changes.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 100 (2013)
Issue (Month): 1 ()
Pages: 74-88

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Handle: RePEc:eee:deveco:v:100:y:2013:i:1:p:74-88

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Growth; Foreign direct investment; Capital structure; Exchange rate volatility; Manufacturing sector;

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Cited by:
  1. Caglayan, Mustafa & Demir, Firat, 2014. "Firm Productivity, Exchange Rate Movements, Sources of Finance, and Export Orientation," World Development, Elsevier, vol. 54(C), pages 204-219.
  2. Alessia LO TURCO & Daniela MAGGIONI, 2012. "Does trade foster employment growth in emerging markets? Evidence from Turkey," Working Papers 383, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Ana María Iregui B. & Luis Fernando Melo V. & María Teresa Ramírez G. & Carmen Cecilia Delgado R., 2013. "El efecto de la volatilidad y del desalineamiento de la tasa de cambio real sobre la actividad de las empresas en Colombia," BORRADORES DE ECONOMIA 011106, BANCO DE LA REPÚBLICA.

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