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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
    1. William Greene, 2001. "Fixed and Random Effects in Nonlinear Models," Working Papers 01-01, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    4. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    5. Tomlin, Ben, 2014. "Exchange rate fluctuations, plant turnover and productivity," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 12-28.
    6. Asaf Akat & Ege Yazgan, 2013. "Observations on Turkey’s Recent Economic Performance," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(1), pages 1-27, March.
    7. Bergin, Paul R. & Feenstra, Robert C., 2000. "Staggered price setting, translog preferences, and endogenous persistence," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 657-680, June.
    8. Sourafel Girma & David Greenaway & Richard Kneller, 2004. "Does Exporting Increase Productivity? A Microeconometric Analysis of Matched Firms," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 855-866, November.
    9. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    10. Loretta Fung, 2008. "Large real exchange rate movements, firm dynamics, and productivity growth," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 391-424, May.
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    12. Li, Hongbin & Ma, Hong & Xu, Yuan, 2015. "How do exchange rate movements affect Chinese exports? — A firm-level investigation," Journal of International Economics, Elsevier, vol. 97(1), pages 148-161.
    13. John Baldwin & Beiling Yan, 2012. "Export Market Dynamics and Plant-Level Productivity: Impact of Tariff Reductions and Exchange-Rate Cycles," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 831-855, September.
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    Blog mentions

    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

    More about this item

    Keywords

    Exchange rate; firm-level; export; emerging markets; survival.;

    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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