Corporate Investment and the Real Exchange Rate
Mai Dao,
Camelia Minoiu and
Jonathan Ostry
No 2017/183, IMF Working Papers from International Monetary Fund
Abstract:
We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.
Keywords: WP; exchange rate; external finance; labor intensity; corporate investment; labor share; real exchange rate; real effects of depreciation; balance sheet channel; firm growth; labor-intensity firm; payroll share; profitability expectation; investment profitability; firm's labor share; unobserved firm-level; firm investment; payroll information; firm balance sheet channel; Depreciation; Financial statements; Financial frictions; Global (search for similar items in EconPapers)
Pages: 47
Date: 2017-08-04
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Citations: View citations in EconPapers (8)
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Journal Article: Corporate investment and the real exchange rate (2021) 
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