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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.

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Bibliographic Info

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

Volume (Year): 97 (2012)
Issue (Month): 2 ()
Pages: 387-395

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Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:387-395

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

Related research

Keywords: Export-led growth; Competitive devaluation; Extensive margin;

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References

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Citations

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Cited by:
  1. Pomfret, Richard & Pontines, Victor, 2013. "Exchange Rate Policy and Regional Trade Agreements: A Case of Conflicted Interests?," ADBI Working Papers 436, Asian Development Bank Institute.
  2. Eichengreen, Barry & Gupta, Poonam, 2013. "The real exchange rate and export growth : are services different ?," Policy Research Working Paper Series 6629, The World Bank.
  3. Juan Marchetti & Michele Ruta & Robert Teh, 2012. "Trade Imbalances and Multilateral Trade Cooperation," CESifo Working Paper Series 4050, CESifo Group Munich.
  4. Caroline Freund, 2014. "Rethinking the National Export Initiative," Policy Briefs PB14-7, Peterson Institute for International Economics.
  5. Augusto de la Torre & Eduardo Levy Yeyati & Samuel Pienknagura, . "Latin America’s Deceleration and the Exchange Rate Buffer : LAC Semiannual Report, October 2013," World Bank Other Operational Studies 16107, The World Bank.

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