Real Effective Exchange Rate and Manufacturing Sector Performance: Evidence from Indian firms
AbstractWe explore the impact of Real Exchange Rate changes on the performance of Indian manufacturing firms over the period 2000-2012. Our empirical analysis shows that real exchange rate movements have a significant impact on Indian firms’ performance through the cost as well as the revenue channel. The impact depends upon the share of imports & exports along with the degree of market power as reflected in the time varying firm level mark up. However, presence of overvaluation negates the beneficial effects of exchange rate appreciation operating through the lower input cost channel. The same cannot be said about the ‘price competitiveness’ effect working through the export channel.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 47479.
Date of creation: 08 Jun 2013
Date of revision:
Real Exchange Rate; Manufacturing Performance; Mark up;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
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