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Multi-destination firms and the impact of exchange-rate risk on trade

Jérôme Héricourt () and Clément Nedoncelle

Journal of Comparative Economics, 2018, vol. 46, issue 4, 1178-1193

Abstract: Based on a French firm-level database that combines information on balance-sheet and destination-specific export information over the period 1995–2009, we document a new stylized fact related to the heterogeneous reaction of exporters to RER volatility: we show that strongly multi-destination firms tend to reduce significantly more their exports to a destination that faces higher exchange-rate volatility. We also show that, following an exchange-rate volatility shock in a given country, strongly multi-destination firms increase exports to all other destinations served. This specific behavior of multi-destination firms has significant aggregate implications. First, the bilateral aggregate impact is increasingly negative with the weight of multi-destination firms in total exports towards the considered destination. Second, the reallocation behavior of large, multi-destination firms ultimately translates into stable total French exports (summed over all destinations).

Keywords: Real exchange-rate volatility; Multi-destination exporters; Reallocation; Aggregation (search for similar items in EconPapers)
JEL-codes: F14 F31 G32 L25 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Multi-destination firms and the impact of exchange-rate risk on trade (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:46:y:2018:i:4:p:1178-1193

DOI: 10.1016/j.jce.2018.07.016

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