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
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=45156 (application/pdf)

Related works:
Journal Article: Corporate investment and the real exchange rate (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2017/183

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().