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Exchange Rates, Borrowing Costs and Exports: Firm-Level Evidence

Listed author(s):
  • Kwan Yong Lee

    (University of North Dakota)

  • Kanda Naknoi

    (University of Connecticut)

This study empirically examines the effects of currency depreciation on the exporting firms' borrowing costs and exports. Using Korean data, first we find novel evidence that unanticipated currency depreciation increases the firm-level real interest rate for firms in sectors importing intermediate inputs. Next, we show that currency depreciation has contractionary effects of rising costs of borrowing and imported inputs, and an expansionary effect of an improvement in price competitiveness. The overall effect of currency depreciation on exports is found to be contractionary, and our estimation has captured the effects of large financial shocks during financial crises.

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File URL: http://web2.uconn.edu/economics/working/2014-18.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2014-18.

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Length: 50 pages
Date of creation: Jul 2014
Handle: RePEc:uct:uconnp:2014-18
Contact details of provider: Postal:
University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063

Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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  8. Aguiar, Mark, 2005. "Investment, devaluation, and foreign currency exposure: The case of Mexico," Journal of Development Economics, Elsevier, vol. 78(1), pages 95-113, October.
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  12. Mary Amiti & David E. Weinstein, 2011. "Exports and Financial Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1841-1877.
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  17. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005. "Understanding European Real Exchange Rates," American Economic Review, American Economic Association, vol. 95(3), pages 724-738, June.
  18. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yiğit, 2011. "Corporate sector liability dollarization and exchange rate balance sheet effect in Turkey," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4741-4747.
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  22. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
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