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Firm Exit and Exchange Rates: An Examination with Turkish Firm-Level Data

Author

Listed:
  • Nazli Karamollaoglu

    (MEF University, Turkey)

  • M. Ege Yazgan

    (Istanbul Bilgi University)

Abstract

Micro-level empirical research has begun to obtain important results on the effects of currency variations on firms' survival. To date, the literature has lacked detailed analysis of the effects of exchange rates on firms' survival behavior in emerging markets due to a scarcity of firm level information. Using a unique firm-level dataset, we test the impact of currency appreciation on the survival behavior of Turkish firms in manufacturing industries for 2002-2009. The results suggest that real exchange rate appreciation decreases the probability of survival in manufacturing industries. We also find that high (low) productivity firms have higher (lower) probability of survival than low (high) productivity firms as a result of domestic exchange rate appreciation. This evidence indicates that economic events/policies leading to appreciation in domestic currency should be cautiously managed, especially in a resource constrained emerging market economy such as Turkey.

Suggested Citation

  • Nazli Karamollaoglu & M. Ege Yazgan, 2014. "Firm Exit and Exchange Rates: An Examination with Turkish Firm-Level Data," Koç University-TUSIAD Economic Research Forum Working Papers 1411, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1411
    as

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1411.pdf
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    References listed on IDEAS

    as
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Firm Exit and Exchange Rates: An Examination with Turkish Firm-Level Data
      by pmakdissi in NEP-ARA blog on 2014-08-25 11:04:24

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    More about this item

    Keywords

    Exchange rate; firm-level; export; emerging markets; survival.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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