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Export Dynamics in Large Devaluations

  • Vivian Yue

    (New York University)

  • Sangeeta Pratap

    (CUNY-Hunter College;)

  • George Alessandria

    (Federal Reserve Bank of Philadelphia;)

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.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1067.

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Date of creation: 2010
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Handle: RePEc:red:sed010:1067
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htm
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