The Multiple Impacts of the Exchange Rate on Export Diversification

Daniel Goya

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: There is evidence that suggests that one of the channels through which the exchange rate could have an impact on growth is export product diversification. I distinguish between the variety and concentration dimensions of export diversification and review the theoretical and empirical literature relating these two dimensions to the level and the volatility of the exchange rate. Using disaggregated trade data for a long panel of countries, I investigate these relationships employing an econometric methodology that allows for heterogeneity of coefficients across countries, and discuss two sources of bias which are often overlooked. I find that the variety dimension of export diversification is positively related to a weaker exchange rate and negatively related to exchange rate volatility. These relationships seem to be stronger for goods with higher technological intensity. I do not find a clear relationship between the exchange rate and the concentration of exports.

Keywords: export diversification; variety; concentration; exchange rate; exchange rate volatility; pooled mean group. (search for similar items in EconPapers)
JEL-codes: F14 F40 O30 (search for similar items in EconPapers)
Date: 2014-10-03
New Economics Papers: this item is included in nep-cse, nep-int and nep-opm
Note: dig25
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1436

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