Foreign Technology Acquisition and Changes in the Real Exchange Rate

Roberto Alvarez and Ricardo López Rago

The World Economy, 2015, vol. 38, issue 4, 613-628

Abstract: type="main" xml:id="twec12253-abs-0001">

This paper uses plant-level data from the manufacturing sector of Chile to investigate how changes in the real exchange rate affect the decision to purchase foreign technologies through licensing. Theoretically, a real depreciation has an ambiguous effect on foreign technology adoption. On the one hand, a real depreciation makes exports more competitive, and as exporters tend to adopt and use more advanced technologies, we should observe a higher propensity to import technologies among them. On the other hand, a real depreciation can also make imports of technology relatively more expensive. Thus, this question must be examined empirically. The empirical analysis shows that a real depreciation significantly increases the probability of using foreign technology licences for plants that export and for plants in the intermediate range of the size and productivity distribution.

Date: 2015
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Working Paper: Foreign Technology Acquisition and Changes in the Real Exchange Rate (2014)
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