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Export concentration in developing countries: do real exchange rate misalignments matter?

Author

Listed:
  • Andrés Jung

    (Universidad Católica del Uruguay)

  • Silvia Vázquez

    (Universidad Católica del Uruguay
    Instituto Desarrollo)

Abstract

The purpose of this paper is to analyse the relation between real exchange rates (RER) misalignments and export concentration in developing countries. Particularly, we explore the relation between these variables in cases of episodes of profound over and undervaluation. The methodology is based on a dynamic model (2S-SGMM estimator) where the concentration of manufactured exports is explained by a lagged RER misalignment, conditional to a set of structural variables, for a panel data of 97 developing countries during 1991–2014. We find a significant relation between RER misalignments and export concentration in a subsequent period for countries in developing stages. Most interestingly, in cases involving episodes of deep RER misalignments, we find asymmetric results: a significant and positive relation between deep overvaluation episodes and export concentration in a subsequent period, but no significant relation in cases of episodes of deep undervaluation. While deep overvaluation episodes can hinder efforts for improving the structural factors underlying export diversification, episodes of deep undervaluation seemingly do not have a relevant influence.

Suggested Citation

  • Andrés Jung & Silvia Vázquez, 2023. "Export concentration in developing countries: do real exchange rate misalignments matter?," International Economics and Economic Policy, Springer, vol. 20(4), pages 563-593, October.
    • Handle: RePEc:kap:iecepo:v:20:y:2023:i:4:d:10.1007_s10368-023-00569-6
    DOI: 10.1007/s10368-023-00569-6
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    More about this item

    Keywords

    Real exchange rate; RER misalignment; Real overvaluation; Exports diversification; Developing countries;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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