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The effect of exchange rates on firm exports and the role of FDI

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  • David Greenaway

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  • Richard Kneller
  • Xufei Zhang

Abstract

This paper studies how exchange rate movements affect the export market entry and intensity decision of firms and the export behaviour of multinationals in the UK. Using data on British manufacturing firms we find that exchange rate movements have little effect on firm export participation but have a significant impact on export shares. Multinationals have at their disposal a greater array of instruments to deal with exchange rates changes, although their use may vary according to the motives behind FDI. We also find important differences according to the country of origin of multinational firms. Multinationals firms originating from outside of the EU are less affected by changes in the exchange rate compared to those inside, who appear similarly affected as domestic firms. Copyright Kiel Institute 2012

Suggested Citation

  • David Greenaway & Richard Kneller & Xufei Zhang, 2012. "The effect of exchange rates on firm exports and the role of FDI," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 425-447, September.
  • Handle: RePEc:spr:weltar:v:148:y:2012:i:3:p:425-447
    DOI: 10.1007/s10290-012-0129-y
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    References listed on IDEAS

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    Cited by:

    1. Roberto Alvarez & Ricardo A. López, 2015. "Foreign Technology Acquisition and Changes in the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 38(4), pages 613-628, April.
    2. repec:bla:worlde:v:40:y:2017:i:11:p:2491-2499 is not listed on IDEAS
    3. repec:gei:jnlfer:v:1:y:2016:i:2:p:119-133 is not listed on IDEAS

    More about this item

    Keywords

    Exchange rate movements; Export share; Multinational firms; F19; F23; F31;

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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