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Global Firms in Large Devaluations

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  • Joaquin Blaum

Abstract

I investigate the consequences of firms’ joint import and export decisions in the context of large devaluations. I provide empirical evidence that large devaluations are characterized by an increase in the aggregate share of imported inputs in total input spending and by reallocation of resources toward import-intensive firms, contrary to what standard quantitative trade models predict. These facts are explained by the expansion of exporters, which are intense importers. I develop a model where firms globally decide their import and export strategies and discipline it to match salient features of the Mexican micro data. After a devaluation, the model reproduces the pattern of low aggregate substitution and firm reallocation observed in the data. Compared with a benchmark without global firms, the model predicts higher growth of total exports and imports and a smaller reduction in the trade deficit.

Suggested Citation

  • Joaquin Blaum, 2024. "Global Firms in Large Devaluations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(4), pages 2427-2474.
    • Handle: RePEc:oup:qjecon:v:139:y:2024:i:4:p:2427-2474.
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    File URL: http://hdl.handle.net/10.1093/qje/qjae017
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    Cited by:

    1. Antrà s, Pol, 2019. "Conceptual Aspects of Global Value Chains," CEPR Discussion Papers 14191, C.E.P.R. Discussion Papers.
    2. Joaquín Blaum & Federico Esposito & Sebastian Heise, 2025. "Input Sourcing Under Supply Chain Risk: Evidence from U.S. Manufacturing Firms," Staff Reports 1141, Federal Reserve Bank of New York.
    3. Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2024. "Foreign Shocks as Granular Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 391-433.
    4. Akira Ishide, 2025. "Allocative Inefficiency during a Sudden Stop," CARF F-Series CARF-F-602, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. Bernabe Lopez‐Martin, 2022. "Firm Export Dynamics And The Exchange Rate: A Quantitative Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1137-1163, August.
    6. Oleg Itskhoki, 2021. "The Story of the Real Exchange Rate," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 423-455, August.
    7. Pol Antras, 2020. "Conceptual Aspects of Global Value Chains," World Bank Publications - Reports 33228, The World Bank Group.
    8. Bems, Rudolfs & Kikkawa, Ayumu Ken, 2021. "Measuring trade in value added with firm-level data," Journal of International Economics, Elsevier, vol. 129(C).
    9. Blaum, Joaquin & Lelarge, Claire & Peters, Michael, 2019. "Firm size, quality bias and import demand," Journal of International Economics, Elsevier, vol. 120(C), pages 59-83.

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