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Exporters’ Reactions to Movements in Exchange Rates: Firm-level Evidence
Stockholm University, Faculty of Social Sciences, Department of Economics.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper analyzes the potential reactions of exporting firms to movements in exchange rates using detailed firm-product level panel data from Sweden covering the period 1997 to 2007. This is done focusing on firms’ decisions regarding export price and quantity as well as entry and exit decisions at the firm and product levels. Moreover, an attempt is made to explain the (incomplete) pass-through of exchange rate changes into import prices using the roles of firm heterogeneities as well as product- and country-level characteristics. The results indicate that Swedish exporters practice a pricing to market strategy, the implied exchange rate pass-through (ERPT) to the local currency price of imports being 84-85 percent. Using non-parametric techniques as well as product-level efficiency measures, the paper finds evidence to support theoretical predictions that the rate of ERPT is declining with increases in productivity/efficiency. Moreover, the paper also shows that firms’ tendency to increase their export price in response to a depreciation of the firm-specific exchange rate increases with their reliance on imports of intermediate inputs. Finally, the results in this paper show the significant role of movements in exchange rates in firms’ extensive margin decisions.

Keyword [en]
Exchange Rates, Exports, Exchange Rate Pass-through
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-136991OAI: oai:DiVA.org:su-136991DiVA: diva2:1058190
Available from: 2016-12-20 Created: 2016-12-20 Last updated: 2017-01-09
In thesis
1. Essays in International trade, exchange rates and prices
Open this publication in new window or tab >>Essays in International trade, exchange rates and prices
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of three self-contained essays in International Trade, Exchange Rates and Prices. Although independent, these essays share some common themes. The first two papers can be related to the vast literature on exchange rate pass-through to prices. While the first paper uses firm-product level data from Sweden to study firms’ export price response to movements in exchange rate, the second paper employs aggregate level data from Ethiopia and looks at the issue from the importers’ perspective. The third paper, like the first paper, uses Swedish firm-level data and investigates firms’ exporting behavior. The third paper, however, specifically focuses on export margins of multi-product firms and studies their response when exporting to destinations of different size and distance from the home country.

Place, publisher, year, edition, pages
Stockholm: Department of Economics, Stockholm University, 2017. 17 p.
Series
Dissertations in Economics, ISSN 1404-3491 ; 2017:1
Keyword
Heterogeneous Firms, Multi-product firms, Exports, Market size, Distance, Exchange rates, Exchange Rate Pass-through, Inflation, SVAR, Sweden, Ethiopia
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:su:diva-137002 (URN)978-91-7649-608-4 (ISBN)978-91-7649-609-1 (ISBN)
Public defence
2017-02-14, Nordenskiöldsalen, Geovetenskapens hus, Svante Arrhenius väg 12, Stockholm, 13:00 (English)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 1: Manuscript. Paper 2: Manuscript. Paper 3: Manuscript.

Available from: 2017-01-20 Created: 2016-12-20 Last updated: 2017-01-27Bibliographically approved

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Citation style
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