Exports and exchange rate : a firm-level investigation
AbstractThis paper investigates the relation between export behaviour and the exchange rate at firm level. We use a dataset of French manufacturing firms from 1994 to 2004, to study the sensitivity of firms' export intensity and probability of entering a foreign market, to the exchange rate. This large dataset allows us to differentiate among 21 manufacturing industries. We show that for most industries, the exchange rate has an influence on export entry, but that the effect of changes in the exchange rate on export intensity is fairly neutral. The probability of entering an export market is increased by depreciation. This supports the presence of export sunk costs, which are more easily incurred by firms in periods of exchange rate depreciation. We conclude that currency appreciation is a cause for concern because it increases import penetration implying higher levels of foreign competition for domestic firms.
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Bibliographic InfoPaper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2008-02.
Date of creation: 2008
Date of revision:
Other versions of this item:
- Sarah Guillou, 2008. "Exports and exchange rate : a firm-level investigation," Sciences Po publications 2008-02, Sciences Po.
- F1 - International Economics - - Trade
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-INT-2008-07-14 (International Trade)
- NEP-OPM-2008-07-14 (Open Economy Macroeconomic)
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