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Export Dynamics in Large Devaluations

Author

Listed:
  • Vivian Yue

    (New York University)

  • Sangeeta Pratap

    (CUNY-Hunter College;)

  • George Alessandria

    (Federal Reserve Bank of Philadelphia;)

Abstract

We study export dynamics in a number of large devaluation episodes in emerging markets. Using plant level data, we document that exports expand gradually following a large devaluation primarily because the number of exporters expands gradually. We show that a model of exporter dynamics with sunk and fixed costs of exporting and idiosyncratic productivity shocks can generate most of the gradual rise in export participation from aggregate productivity shocks and global interest rate shocks. Countercyclical interest rates lower the present value of exporting following the devaluation discouraging exporting and partially o¤setting the effect on trade from the change in relative prices. We conclude there is a small role for credit frictions in explaining the gradual rise in trade and export participation.

Suggested Citation

  • Vivian Yue & Sangeeta Pratap & George Alessandria, 2010. "Export Dynamics in Large Devaluations," 2010 Meeting Papers 1067, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:1067
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    1. Export Dynamics in Large Devaluations
      by Christian Zimmermann in NEP-DGE blog on 2013-06-09 05:48:43

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    7. Zhen Huo & José-Víctor Ríos-Rull, 2016. "Financial Frictions, Asset Prices, and the Great Recession," Staff Report 526, Federal Reserve Bank of Minneapolis.
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    9. Sandile Hlatshwayo & Mr. Magnus Saxegaard, 2016. "The Consequences of Policy Uncertainty: Disconnects and Dilutions in the South African Real Effective Exchange Rate-Export Relationship," IMF Working Papers 2016/113, International Monetary Fund.
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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