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Exchange Rate Policy and Firm Heterogeneity

Author

Listed:
  • Masashige Hamano

    (Waseda University)

  • Francesco Pappadà

    (Banque de France)

Abstract

This paper examines the exchange rate policy in a tractable framework with heterogeneous firms, incomplete financial markets and nominal rigidities. External demand shocks generate exchange rate movements leading to uncertainty in the labor demand of exporter firms. When exporter firms are homogeneous in terms of productivity, a monetary policy response to external demand shocks stabilizes the export market and improves welfare, thus providing a rationale for managed exchange rate policies.

Suggested Citation

  • Masashige Hamano & Francesco Pappadà, 2023. "Exchange Rate Policy and Firm Heterogeneity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 759-790, September.
    • Handle: RePEc:pal:imfecr:v:71:y:2023:i:3:d:10.1057_s41308-022-00188-2
    DOI: 10.1057/s41308-022-00188-2
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    References listed on IDEAS

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    24. Francesco Pappadà, 2011. "Real Adjustment of Current Account Imbalances with Firm Heterogeneity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(3), pages 431-454, August.
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    Cited by:

    1. Masashige Hamano & Francesco Pappadà & Maria Teresa Punzi, 2023. "Optimal Monetary Policy, Tariff Shocks and Exporter Dynamics," Working Papers 2309, Waseda University, Faculty of Political Science and Economics.

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    More about this item

    Keywords

    F32; F41; E40;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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