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Exchange Rate Policy and Firm Heterogeneity

Author

Listed:
  • Masashige Hamano

    (Waseda University [Tokyo, Japan])

  • Francesco Pappadà

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Banque de France - Banque de France - 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," PSE-Ecole d'économie de Paris (Postprint) halshs-04346913, HAL.
    • Handle: RePEc:hal:pseptp:halshs-04346913
    DOI: 10.1057/s41308-022-00188-2
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    Cited by:

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    2. 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.

    More about this item

    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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