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Exchange Rates and Firm Exports: The Role of Foreign Ownership and Foreign Subsidiaries

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  • Hyelin Choi

    (Department of Global Commerce Soongsil University 369 Sangdoro Dongjakgu, Seoul, 06978, Korea)

  • Hyo Sang Kim

    (Department of International Macroeconomics and Finance Korea Institute for International Economic Policy Building C, Sejong National Research Complex 370 Sicheongdaero Sejong-si, 30147, Korea)

Abstract

This paper examines the role of global production linkages on exchange rate elasticities by using Korean firm-level data. Firms with foreign ownership or with foreign subsidiaries, which are linked to global production, tend to weaken the effects of exchange rate movements on firm exports. We find the exchange rate elasticities of firm exports are significant and tend to have a negative effect on domestic firms or firms with no foreign subsidiary. In contrast, the results show an insignificant effect on foreign-owned firms or firms with foreign subsidiaries. After controlling for the export to foreign affiliates, we still find the estimated exchange rate elasticities of exports to be statistically insignificant, although it has a negative and relatively large impact for firms with global production linkages. Moreover, firms with a higher global value chain integration measure or more imported intermediate inputs have a significantly lower exchange rate elasticity of exports. This indicates that the developments in global production linkages have an important role in explaining lower exchange rate elasticity to exports.

Suggested Citation

  • Hyelin Choi & Hyo Sang Kim, 2020. "Exchange Rates and Firm Exports: The Role of Foreign Ownership and Foreign Subsidiaries," Asian Economic Papers, MIT Press, vol. 19(2), pages 103-118, Summer.
    • Handle: RePEc:tpr:asiaec:v:19:y:2020:i:2:p:103-118
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    References listed on IDEAS

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