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The Decision to Export and the Volatility of Sales

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  • Alejandro Riaño

Abstract

This paper studies the export decision of risk-averse firms in a model featuring aggregate uncertainty and no capital markets. Firms seeking to enter the foreign market face a sunk cost as well as a fixed participation cost every period they export. Using a calibrated version of the model, I show that firms are more likely to export when the correlation between domestic and foreign aggregate shocks is negative and when their degree of risk-aversion is higher. Counterfactual experiments show that exporting increases the volatility of total sales.

Suggested Citation

  • Alejandro Riaño, 2010. "The Decision to Export and the Volatility of Sales," Discussion Papers 10/12, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:10/12
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2010/10-12.pdf
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