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Monetary shocks, exchange rates, and the extensive margin of exports

  • Cooke, Dudley
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    This paper develops a two-country Dynamic General Equilibrium model to assess the relationship between the real exchange rate and the extensive margin of exports. Exchange rate pass-through to consumer prices governs the relative strength of a demand channel onto the exporting decision of a firm. With incomplete pass-through, a favorable movement in the real exchange rate generates increased export participation and an expansion in the extensive margin of exports. This result is consistent with firm-level studies, and contributes to an ongoing empirical debate as to the importance of changes in export participation over the business cycle.

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    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 41 (2014)
    Issue (Month): C ()
    Pages: 128-145

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    Handle: RePEc:eee:jimfin:v:41:y:2014:i:c:p:128-145
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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