Monetary shocks, exchange rates, and the extensive margin of exports

Dudley Cooke ()

Journal of International Money and Finance, 2014, vol. 41, issue C, 128-145

Abstract: This paper develops a two-country Dynamic General Equilibrium model to assess the relationship between the real exchange rate and the extensive margin of exports. Exchange rate pass-through to consumer prices governs the relative strength of a demand channel onto the exporting decision of a firm. With incomplete pass-through, a favorable movement in the real exchange rate generates increased export participation and an expansion in the extensive margin of exports. This result is consistent with firm-level studies, and contributes to an ongoing empirical debate as to the importance of changes in export participation over the business cycle.

Keywords: Exchange rate pass-through; Extensive margin of exports; Monetary shocks (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:41:y:2014:i:c:p:128-145

DOI: 10.1016/j.jimonfin.2013.10.003

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