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How do manufacturing exports react to RER and foreign demand? The Chilean case

Author

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  • Jorge A. Fornero
  • Miguel A. Fuentes
  • Andrés Gatty

Abstract

How do manufacturing exports react to the real exchange rate and to foreign demand? We investigate this question using Chilean panel data spanning from 2003.Q1 to 2016.Q4. We find that the recent fall in manufacturing exports growth is consistent with a persistent slowdown in foreign demand, which has been partially offset by an average depreciation of the bilateral real exchange rate (with respect to destination countries of these exports). Specifically, the short-run elasticities of manufacturing exports differ in size: (i) the elasticity of foreign demand —approximated by trading partners’ activity aggregates— ranges between 1.4 and 2; and (ii) the elasticity with respect to the bilateral real exchange rate is comprehended in the interval [0.4 - 0.6]. Core estimated elasticities pass usual robustness checks.

Suggested Citation

  • Jorge A. Fornero & Miguel A. Fuentes & Andrés Gatty, 2017. "How do manufacturing exports react to RER and foreign demand? The Chilean case," Working Papers Central Bank of Chile 810, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:810
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    References listed on IDEAS

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    1. David C. López-Valenzuela & Enrique Montes-Uribe & Héctor M. Zárate-Solano & Alvaro Carmona-Duarte, 2019. "Determinantes y evolución entre precios y cantidades de las exportaciones industriales de Colombia: un estudio a partir de un modelo de Panel-VAR," Borradores de Economia 1075, Banco de la Republica de Colombia.

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