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Heterogeneous effect of exchange rates on firms’ exports: Role of labor intensity

Author

Listed:
  • Kurmas Akdogan
  • Yusuf Kenan Bagir
  • Huzeyfe Torun

Abstract

Using an extensive firm-level database that combines balance sheet information, social security registry and customs data, we examine whether the relationship between the exchange rate and exports change with the degree of labor-intensity of production. The results based on manufacturing firms in Türkiye suggest that the sensitivity of labor-intensive firms to the exchange rate is higher than that of the less labor-intensive ones, both at the intensive and extensive margins of exports. In addition, export product variety and export market variety of the labor-intensive firms increase more than the others during a currency depreciation. In particular, the increase in the exports of the labor-intensive firms is 2.7 percent higher than the increase in exports of the non-labor-intensive firms in case of a 10 percent decline in the real effective exchange rate. However, we do not find a significant impact on the export prices varying across the labor-intensity of the firms. Our results are robust to alternative definitions of labor-intensity and exchange rates, and the use of different time spans.

Suggested Citation

  • Kurmas Akdogan & Yusuf Kenan Bagir & Huzeyfe Torun, 2023. "Heterogeneous effect of exchange rates on firms’ exports: Role of labor intensity," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 23(3).
    • Handle: RePEc:tcb:cebare:v:23:y:2023:i:3:article:100130
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    Keywords

    Exports; Exchange rates; Labor-intensity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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