The Causal Effects of Expected Depreciations

Martha Elena Delgado, Juan Herreño, Marc Hofstetter and Mathieu Pedemonte

No 24-07, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We estimate the causal effects of a shift in the expected future exchange rate of a local currency against the US dollar on a representative sample of firms in an open economy. We survey a nationally representative sample of firms and provide the one-year-ahead nominal exchange rate forecast published by the local central bank to a random sub-sample of firm managers. The treatment is effective in shifting exchange rate and inflation expectations and perceptions. These effects are persistent and larger for non-exporting firms. Linking survey responses with administrative census data, we find that the treatment affects the dynamics of export and import quantities and prices at the firm level, with differential effects for exports to destination countries that use the US dollar as their currency. We instrument exchange rate expectations with the variation induced by the treatment and estimate a positive elasticity of a future expected depreciation in import expenditures.

Keywords: expectations; exchange rate; firms (search for similar items in EconPapers)
JEL-codes: E31 E71 F31 G41 (search for similar items in EconPapers)
Pages: 41
Date: 2024-03-25
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-202407 Persistent Link (text/html)
https://www.clevelandfed.org/-/media/project/cleve ... pers/2024/wp2407.pdf Full Text (application/pdf)

Related works:
Working Paper: The Causal Effects of Expected Depreciations (2024)
Working Paper: The Causal Effects of Expected Depreciations (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:97957

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-202407

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().