Forward Looking Exporters

François de Soyres, Erik Frohm (), Emily Highkin and Carter Mix
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Carter Mix: https://www.federalreserve.gov/econres/carter-b-mix.htm

No 1377, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper studies the role of expectations in driving export adjustment. We assemble bilateral data on spot exchange rates, one year ahead exchange rate forecasts and HS2-product export data for 11 exporting countries and 64 destinations, covering the 2006–2014 period. Results from fixed effects regressions and an instrumental variables approach show that expectations of exchange rate changes are an important channel for export adjustment. A one percent expected exchange rate depreciation over the next year is associated with a 0.96 percent increase in the extensive margin (entry of new exporters) in the 2SLS regression, with statistically insignificant effects on total exports or the intensive margin. We provide intuition for these findings with a simple model with heterogeneous firms and sticky prices, and use our model to discuss the implications of anticipation for subsequent export growth and trade elasticity measurement.

Keywords: exchange rates; heterogeneous firms; international trade (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2023-07-13
New Economics Papers: this item is included in nep-int and nep-opm
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Working Paper: Forward Looking Exporters (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:96661

DOI: 10.17016/IFDP.2023.1377

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