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Manufacturing restructuring and the role of Real exchange rate shocks: A firm level analysis

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Author Info
Ekholm, Karolina
Moxnes, Andreas
Ulltveit-Moe, Karen-Helene
Abstract

Empirical analyses of the impact of real exchange rate (RER) fluctuations on employment and economic performance do not take heterogeneity with respect to trade exposure into account. In this paper we use detailed Norwegian firm-level data on exports and imports to calculate firm-specific measures of trade exposure. This allows us to provide a more accurate assessment of the adjustment to real exchange rate shocks. We treat the sharp real appreciation of the Norwegian Krone in the early 2000s as a natural experiment to identify firms' response to an RER shock with respect to employment, productivity, and offshoring. We find that the relative cost shock that hit the Norwegian economy led to a significant decline in the more exposed firms' employment. But the RER shock also appears to have contributed to a process of manufacturing restructuring that boosted productivity of firms exposed to foreign markets. A sizable increase in offshoring can also be attributed to the RER shock.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6904.

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Date of creation: Jul 2008
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Handle: RePEc:cpr:ceprdp:6904

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Keywords: Employment Productivity Real Exchange Rates Trade

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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This page was last updated on 2008-11-7.

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