How do manufacturing exports react to RER and foreign demand? The Chilean case

Jorge Fornero, Miguel A. Fuentes and Andres Gatty ()

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: How do manufacturing exports react to the real exchange rate and to foreign demand? We investigate this question using Chilean panel data spanning from 2003.Q1 to 2016.Q4. We find that the recent fall in manufacturing exports growth is consistent with a persistent slowdown in foreign demand, which has been partially offset by an average depreciation of the bilateral real exchange rate (with respect to destination countries of these exports). Specifically, the short-run elasticities of manufacturing exports differ in size: (i) the elasticity of foreign demand —approximated by trading partners’ activity aggregates— ranges between 1.4 and 2; and (ii) the elasticity with respect to the bilateral real exchange rate is comprehended in the interval [0.4 - 0.6]. Core estimated elasticities pass usual robustness checks.

Date: 2017-11
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:810

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