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Export surges

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  • Freund, Caroline
  • Pierola, Martha Denisse

Abstract

How can developing countries stimulate and sustain strong export growth? To answer this question, we examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least 7years. We find that export surges in developing countries tend to be preceded by a large real depreciation, which leaves the exchange rate significantly undervalued. In contrast, in developed countries, the role of the exchange rate is less pronounced. We examine why the exchange rate is important in developing countries and find that the depreciation is associated with a significant reallocation of resources in the export sector. In particular, depreciation stimulates entry into new export products and new markets. These new exports are important, accounting for over 40% of export growth on average during the surge in developing countries. We argue that a large real depreciation induces firms to expand the product and market space for exports.

Suggested Citation

  • Freund, Caroline & Pierola, Martha Denisse, 2012. "Export surges," Journal of Development Economics, Elsevier, vol. 97(2), pages 387-395.
    • Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:387-395
    DOI: 10.1016/j.jdeveco.2011.06.008
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    Citations

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    Cited by:

    1. Wagner, Rodrigo & Zahler, Andrés, 2015. "New exports from emerging markets: Do followers benefit from pioneers?," Journal of Development Economics, Elsevier, vol. 114(C), pages 203-223.
    2. Eichengreen, Barry & Gupta, Poonam, 2012. "The Real Exchange Rate and Export Growth: Are Services Different?," Working Papers 12/112, National Institute of Public Finance and Policy.
    3. Sekkat, Khalid, 2016. "Exchange rate misalignment and export diversification in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 1-14.
    4. Emiliano Libman & Juan Antonio Montecino & Arslan Razmi, 2019. "Sustained investment surges," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 1071-1095.
    5. Frenkel, Roberto & Rapetti, Martin, 2014. "The real exchange rate as a target of macroeconomic policy," MPRA Paper 59335, University Library of Munich, Germany.
    6. Freund, Caroline & Rijkers, Bob, 2014. "Episodes of unemployment reduction in rich, middle-income and transition economies," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 907-923.
    7. Araújo, Bruno César & Paz, Lourenço S., 2014. "The effects of exporting on wages: An evaluation using the 1999 Brazilian exchange rate devaluation," Journal of Development Economics, Elsevier, vol. 111(C), pages 1-16.
    8. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(3), pages 577-605, July.
    9. Marchetti, Juan & Ruta, Michele & Teh, Robert, 2012. "Trade imbalances and multilateral trade cooperation," WTO Staff Working Papers ERSD-2012-23, World Trade Organization (WTO), Economic Research and Statistics Division.
    10. repec:cii:cepiei:2015-q1-141-8 is not listed on IDEAS
    11. Ibrahim A. Elbadawi & Linda Kaltani, 2014. "Real Exchange Rates and Export Performance in Oil-Dependent Arab Economies," Working Papers 878, Economic Research Forum, revised Nov 2014.
    12. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 9816, Department of Economics, University of Sussex.
    13. Augusto de la Torre & Eduardo Levy Yeyati & Samuel Pienknagura, "undated". "Latin America’s Deceleration and the Exchange Rate Buffer : LAC Semiannual Report, October 2013," World Bank Publications - Reports 16107, The World Bank Group.
    14. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 09816, Department of Economics, University of Sussex Business School.
    15. Alsharif, Nouf & Bhattacharyya, Sambit & Intartaglia, Maurizio, 2017. "Economic diversification in resource rich countries: History, state of knowledge and research agenda," Resources Policy, Elsevier, vol. 52(C), pages 154-164.
    16. Victor Pontines & Richard Pomfret, 2014. "Exchange rate policy and regional trade agreements: a case of conflicted interests?," Chapters, in: Richard Baldwin & Masahiro Kawai & Ganeshan Wignaraja (ed.), A World Trade Organization for the 21st Century, chapter 7, pages 157-181, Edward Elgar Publishing.
    17. Caroline Freund, 2014. "Rethinking the National Export Initiative," Policy Briefs PB14-7, Peterson Institute for International Economics.

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    More about this item

    Keywords

    Export-led growth; Competitive devaluation; Extensive margin;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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