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Exporters and Shocks: Dissecting the International Elasticity Puzzle

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  • Doireann Fitzgerald
  • Stefanie Haller

Abstract

We use micro data for Ireland to estimate how export participation and the export revenue of incumbent exporters respond to tariffs and real exchange rates. Both participation and revenue, but especially revenue, are more responsive to tariffs than to real exchange rates. Our estimates translate into an elasticity of aggregate exports with respect to tariffs of between -3.8 and -5.4, and with respect to real exchange rates of between 0.45 and 0.6, consistent with estimates in the literature based on aggregate data. We argue that forward-looking investment in customer base combined with the fact that tariffs are much more predictable than real exchange rates can explain why export revenue responds so much more to tariffs.

Suggested Citation

  • Doireann Fitzgerald & Stefanie Haller, 2014. "Exporters and Shocks: Dissecting the International Elasticity Puzzle," NBER Working Papers 19968, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19968
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    Cited by:

    1. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    2. Yaniv Yedid-Levi & Stefanie Haller & Doireann Fitzgerald, 2016. "How Exporters Grow," 2016 Meeting Papers 499, Society for Economic Dynamics.
    3. Antoine Berthou & Lionel Fontagné, 2016. "Variable Trade Costs, Composition Effects and the Intensive Margin of Trade," The World Economy, Wiley Blackwell, vol. 39(1), pages 54-71, January.
    4. Willem THORBECKE & Nimesh SALIKE & CHEN Chen, 2020. "China's Exports in a Protectionist World," Discussion papers 20011, Research Institute of Economy, Trade and Industry (RIETI).
    5. Yilmazkuday, Hakan, 2019. "Understanding the international elasticity puzzle," Journal of Macroeconomics, Elsevier, vol. 59(C), pages 140-153.
    6. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    7. Agnès Bénassy‐Quéré & Matthieu Bussière & Pauline Wibaux, 2021. "Trade and currency weapons," Review of International Economics, Wiley Blackwell, vol. 29(3), pages 487-510, August.
    8. Hakan Yilmazkuday, 2017. "Unifying Macro Elasticities in International Economics," Globalization Institute Working Papers 299, Federal Reserve Bank of Dallas.
    9. Salamat Ali, 2017. "Exchange Rate Effects on Agricultural Exports: Firm-level Evidence from Pakistan," Discussion Papers 2017-09, University of Nottingham, GEP.
    10. 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.
    11. Richard Fabling & Lynda Sanderson, 2015. "Exchange rate fluctuations and the margins of exports," Treasury Working Paper Series 15/08, New Zealand Treasury.
    12. Matthieu Bussière & Guillaume Gaulier & Walter Steingress, 2020. "Global Trade Flows: Revisiting the Exchange Rate Elasticities," Open Economies Review, Springer, vol. 31(1), pages 25-78, February.
    13. Ernest Gnan & Mar Gudmundsson & Klaus Liebscher & Dietrich Domanski & Alexandra Heath & Juan Delgado & Walter Boltz & Birger Vikoren & Vasily Astrov & Stephan Barisitz & Simon-Erik Ollus & Ulrich Kohl, 2008. "Commodities, Energy and Finance," SUERF Studies, SUERF - The European Money and Finance Forum, number 2008/2 edited by Ernest Gnan & Mar Gudmundsson & Morten Balling, August.
    14. Thorbecke, Willem, 2019. "East Asian value chains, exchange rates, and regional exchange rate arrangements," Journal of Asian Economics, Elsevier, vol. 65(C).
    15. Veronica Rappoport & Philipp Schnabl & Daniel Paravisini, 2015. "Comparative Advantage and Specialization in Bank Lending," 2015 Meeting Papers 499, Society for Economic Dynamics.
    16. Salamat Ali, 2020. "Exchange Rate Effects on Agricultural Exports: Transaction‐Level Evidence from Pakistan," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 1020-1044, May.

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    JEL classification:

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

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