| By: |
Alfaro, Laura;
Cunat, Alejandro;
Fadinger, Harald;
Yanping, Liu |
| Abstract: |
We evaluate manufacturing firms' responses to changes in the real exchange
rate (RER) using detailed firm-level data for a large set of countries for the
period 2001-2010. We uncover the following stylized facts: In emerging Asia,
real depreciations are associated with faster growth of firm-level TFP, sales
and cashow, higher probabilities to engage in R&D and export. We find no
significant effects for firms from industrialized economies and negative
effects for firms in other emerging economies, which are less export-intensive
and more import-intensive. Motivated by these facts, we build a dynamic model
in which real depreciations raise the cost of importing intermediates, but
increase demand and the profitability to engage in exports and R&D, thereby
relaxing borrowing constraints and enabling more firms to overcome the
fixed-cost hurdle for financing R&D. We decompose the effects of RER changes
on productivity growth into these channels and explain regional heterogeneity
in the effects of RER changes in terms of differences in export intensity,
import intensity and financial constraints. We estimate the model and
quantitatively evaluate the different mechanisms by providing counterfactual
simulations of temporary real exchange rate movements. Effects on physical TFP
growth, while different across regions, are non-linear and asymmetric. |
| Keywords: |
real exchange rate , firm level data , innovation , productivity , exporting , importing , credit constraints |
| JEL: |
F O |
| Date: |
2017 |
| URL: |
http://d.repec.org/n?u=RePEc:mnh:wpaper:43163&r=ifn |