IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v97y2012i2p387-395.html
   My bibliography  Save this article

Export surges

Author

Listed:
  • Freund, Caroline
  • Pierola, Martha Denisse

Abstract

How can developing countries stimulate and sustain strong export growth? To answer this question, we examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least 7years. We find that export surges in developing countries tend to be preceded by a large real depreciation, which leaves the exchange rate significantly undervalued. In contrast, in developed countries, the role of the exchange rate is less pronounced. We examine why the exchange rate is important in developing countries and find that the depreciation is associated with a significant reallocation of resources in the export sector. In particular, depreciation stimulates entry into new export products and new markets. These new exports are important, accounting for over 40% of export growth on average during the surge in developing countries. We argue that a large real depreciation induces firms to expand the product and market space for exports.

Suggested Citation

  • Freund, Caroline & Pierola, Martha Denisse, 2012. "Export surges," Journal of Development Economics, Elsevier, vol. 97(2), pages 387-395.
  • Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:387-395
    DOI: 10.1016/j.jdeveco.2011.06.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387811000654
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jdeveco.2011.06.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, CESifo Group, vol. 52(2), pages 246-275, June.
    3. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
    4. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "A corporate balance-sheet approach to currency crises," Journal of Economic Theory, Elsevier, vol. 119(1), pages 6-30, November.
    5. Bayoumi, Tamim, 1998. "Estimating Trade Equations from Aggregate Bilateral Data," CEPR Discussion Papers 1970, C.E.P.R. Discussion Papers.
    6. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
    7. Benjamin F. Jones & Benjamin A. Olken, 2008. "The Anatomy of Start-Stop Growth," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 582-587, August.
    8. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," The World Bank Economic Review, World Bank, vol. 22(2), pages 187-231, June.
    9. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
    10. Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open- Economy Macroeconomics," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(S1), pages 23-46, December.
    11. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
    12. Josep M Vilarrubia & Rubén Segura-Cayuela, 2008. "Uncertainty and entry into export markets," 2008 Meeting Papers 661, Society for Economic Dynamics.
    13. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2016. "Do Exporters Really Pay Higher Wages? First Evidence from German Linked Employer–Employee Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 5, pages 177-213, World Scientific Publishing Co. Pte. Ltd..
    14. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    15. Hoyt Bleakley & Kevin Cowan, 2008. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 612-626, November.
    16. Cheung, Yin-Wong & Chinn, Menzie D. & Fujii, Eiji, 2007. "The overvaluation of Renminbi undervaluation," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 762-785, September.
    17. Blalock, Garrick & Gertler, Paul J. & Levine, David I., 2008. "Financial constraints on investment in an emerging market crisis," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 568-591, April.
    18. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    19. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages 4-21, February.
    20. Mr. Fabian Valencia & Mr. Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
    21. Krueger, Anne O, 1998. "Why Trade Liberalisation Is Good for Growth," Economic Journal, Royal Economic Society, vol. 108(450), pages 1513-1522, September.
    22. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    23. Freund, Caroline, 2005. "Current account adjustment in industrial countries," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1278-1298, December.
    24. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    25. Arslan, Ismail & van Wijnbergen, Sweder, 1993. "Export Incentives, Exchange Rate Policy and Export Growth in Turkey," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 128-133, February.
    26. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2008. "Export Dynamics in Colombia: Transactions Level Evidence," Borradores de Economia 4748, Banco de la Republica.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wagner, Rodrigo & Zahler, Andrés, 2015. "New exports from emerging markets: Do followers benefit from pioneers?," Journal of Development Economics, Elsevier, vol. 114(C), pages 203-223.
    2. Sekkat, Khalid, 2016. "Exchange rate misalignment and export diversification in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 1-14.
    3. Frenkel, Roberto & Rapetti, Martin, 2014. "The real exchange rate as a target of macroeconomic policy," MPRA Paper 59335, University Library of Munich, Germany.
    4. Araújo, Bruno César & Paz, Lourenço S., 2014. "The effects of exporting on wages: An evaluation using the 1999 Brazilian exchange rate devaluation," Journal of Development Economics, Elsevier, vol. 111(C), pages 1-16.
    5. repec:cii:cepiei:2015-q1-141-8 is not listed on IDEAS
    6. Augusto de la Torre & Eduardo Levy Yeyati & Samuel Pienknagura, "undated". "Latin America’s Deceleration and the Exchange Rate Buffer : LAC Semiannual Report, October 2013," World Bank Publications - Reports 16107, The World Bank Group.
    7. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 09816, Department of Economics, University of Sussex Business School.
    8. Eichengreen, Barry & Gupta, Poonam, 2012. "The Real Exchange Rate and Export Growth: Are Services Different?," MPRA Paper 43358, University Library of Munich, Germany.
    9. Alsharif, Nouf & Bhattacharyya, Sambit & Intartaglia, Maurizio, 2017. "Economic diversification in resource rich countries: History, state of knowledge and research agenda," Resources Policy, Elsevier, vol. 52(C), pages 154-164.
    10. Victor Pontines & Richard Pomfret, 2014. "Exchange rate policy and regional trade agreements: a case of conflicted interests?," Chapters, in: Richard Baldwin & Masahiro Kawai & Ganeshan Wignaraja (ed.), A World Trade Organization for the 21st Century, chapter 7, pages 157-181, Edward Elgar Publishing.
    11. Juan Marchetti & Michele Ruta & Robert Teh, 2012. "Trade Imbalances and Multilateral Trade Cooperation," CESifo Working Paper Series 4050, CESifo.
    12. Emiliano Libman & Juan Antonio Montecino & Arslan Razmi, 2019. "Sustained investment surges," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 1071-1095.
    13. Freund, Caroline & Rijkers, Bob, 2014. "Episodes of unemployment reduction in rich, middle-income and transition economies," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 907-923.
    14. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(3), pages 577-605, July.
    15. Ibrahim A. Elbadawi & Linda Kaltani, 2014. "Real Exchange Rates and Export Performance in Oil-Dependent Arab Economies," Working Papers 878, Economic Research Forum, revised Nov 2014.
    16. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 9816, Department of Economics, University of Sussex.
    17. Caroline Freund, 2014. "Rethinking the National Export Initiative," Policy Briefs PB14-7, Peterson Institute for International Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Freund, Caroline & Pierola, Martha Denisse, 2008. "Export surges : the oower of a competitive currency," Policy Research Working Paper Series 4750, The World Bank.
    2. Sundar Ponnusamy, 2022. "Export specialization, trade liberalization and economic growth: a synthetic control analysis," Empirical Economics, Springer, vol. 63(2), pages 637-669, August.
    3. Pişkin, Erhan, 2017. "Türkiye İhracatının Ölüm-Kalım Meselesi [The Matter of Survival for Turkish Exports]," MPRA Paper 81459, University Library of Munich, Germany.
    4. Kohn, David & Leibovici, Fernando & Szkup, Michal, 2020. "Financial frictions and export dynamics in large devaluations," Journal of International Economics, Elsevier, vol. 122(C).
    5. Ana Fernandes & Heiwai Tang, 2012. "Learning from Neighbors' Export Activities: Evidence from Exporters' Survival," Discussion Papers Series, Department of Economics, Tufts University 0766, Department of Economics, Tufts University.
    6. Gnidchenko, A., 2014. "Decomposing Export Growth into Extensive and Intensive Margins with the Emphasis on Comparative Advantages," Journal of the New Economic Association, New Economic Association, vol. 24(4), pages 38-64.
    7. Eswar S. Prasad & Kenneth Rogoff & Shang-Jin Wei & M. Ayhan Kose, 2007. "Financial Globalization, Growth and Volatility in Developing Countries," NBER Chapters, in: Globalization and Poverty, pages 457-516, National Bureau of Economic Research, Inc.
    8. Andrea Ariu, 2012. "Services versus goods trade: Are they the same?," Working Paper Research 237, National Bank of Belgium.
    9. Asche, Frank & Cojocaru, Andreea L. & Gaasland, Ivar & Straume, Hans-Martin, 2018. "Cod stories: Trade dynamics and duration for Norwegian cod exports," Journal of Commodity Markets, Elsevier, vol. 12(C), pages 71-79.
    10. Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2016. "Exporter behavior, country size and stage of development: Evidence from the exporter dynamics database," Journal of Development Economics, Elsevier, vol. 119(C), pages 121-137.
    11. Stephen Nelson, 2010. "Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law," The Review of International Organizations, Springer, vol. 5(2), pages 107-139, June.
    12. Rishav Bista & Brandon J. Sheridan, 2021. "Economic growth takeoffs and the extensive and intensive margins of trade," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1373-1396, August.
    13. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    14. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    15. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    16. Mélise Jaud & Madina Kukenova & Martin Strieborny, 2009. "Financial dependence and intensive margin of trade," PSE Working Papers halshs-00575005, HAL.
    17. Paulo Bastos & Daniel A. Dias & Olga A. Timoshenko, 2018. "Learning, prices and firm dynamics," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1257-1311, November.
    18. Bühler, Stefan & Helm, Marco & Lechner, Michael, 2011. "Trade Liberalization and Growth: Plant-Level Evidence from Switzerland," Economics Working Paper Series 1133, University of St. Gallen, School of Economics and Political Science.
    19. Kose, M. Ayhan & Prasad, Eswar S. & Terrones, Marco E., 2006. "How do trade and financial integration affect the relationship between growth and volatility?," Journal of International Economics, Elsevier, vol. 69(1), pages 176-202, June.
    20. Koopmann, Georg & Hoekstra, Ruth, 2010. "Aid for trade and the political economy of trade liberalization," HWWI Research Papers 2-22, Hamburg Institute of International Economics (HWWI).

    More about this item

    Keywords

    Export-led growth; Competitive devaluation; Extensive margin;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:387-395. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/devec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.