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Reassessing the role of exchange rates in export dynamics: Evidence from a disaggregated industry-level analysis in the case of Nepal

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  • Dahal, Ashmita
  • Byanjankar, Rohan
  • Jangam, Bhushan Praveen
  • Rath, Badri Narayan

Abstract

We analyze the impact of traditional and value-added exchange rates on exports across 33 industries in Nepal from 2007 to 2021. Using a panel system generalised method of moments estimator, the study finds that traditional exchange rate appreciation reduces exports, while value-added exchange rate appreciation increases exports. These findings are consistent across manufacturing and services sectors. The study also identifies growing integration into global value chains (GVCs) as a key driver of export dynamics and the disconnect between exports and exchange rates. This research contributes to the literature by highlighting the distinct effects of exchange rates and the importance of GVCs.

Suggested Citation

  • Dahal, Ashmita & Byanjankar, Rohan & Jangam, Bhushan Praveen & Rath, Badri Narayan, 2025. "Reassessing the role of exchange rates in export dynamics: Evidence from a disaggregated industry-level analysis in the case of Nepal," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1752-1759.
    • Handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:1752-1759
    DOI: 10.1016/j.eap.2025.01.027
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    More about this item

    Keywords

    Exports; Exchange rate; Value-added; Disaggregated industries; Panel system GMM; Nepal;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F1 - International Economics - - Trade
    • G01 - Financial Economics - - General - - - Financial Crises

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