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Exports and Exchange Rate: A Firm-Level Investigation

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  • Sarah Guillou

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper investigates the relation between export behaviour and the exchange rate at firm level. We use a dataset of French manufacturing firms from 1994 to 2004, to study the sensitivity of firms' export intensity and probability of entering a foreign market, to the exchange rate. This large dataset allows us to differentiate among 21 manufacturing industries. We show that for most industries, the exchange rate has an influence on export entry, but that the effect of changes in the exchange rate on export intensity is fairly neutral. The probability of entering an export market is increased by depreciation. This supports the presence of export sunk costs, which are more easily incurred by firms in periods of exchange rate depreciation. We conclude that currency appreciation is a cause for concern because it increases import penetration implying higher levels of foreign competition for domestic firms.

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  • Sarah Guillou, 2008. "Exports and Exchange Rate: A Firm-Level Investigation," SciencePo Working papers Main hal-01053170, HAL.
    • Handle: RePEc:hal:spmain:hal-01053170
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01053170
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    References listed on IDEAS

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