NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Exporters and Shocks: Dissecting the International Elasticity Puzzle

Doireann Fitzgerald, Stefanie Haller

NBER Working Paper No. 19968
Issued in March 2014, Revised in May 2017
NBER Program(s):International Finance and Macroeconomics, International Trade and Investment

We use micro data for Ireland to estimate how export participation and the export revenue of incumbent exporters respond to tariffs and real exchange rates. Both participation and revenue, but especially revenue, are more responsive to tariffs than to real exchange rates. Our estimates translate into an elasticity of aggregate exports with respect to tariffs of between -3.8 and -5.4, and with respect to real exchange rates of between 0.45 and 0.6, consistent with estimates in the literature based on aggregate data. We argue that forward-looking investment in customer base combined with the fact that tariffs are much more predictable than real exchange rates can explain why export revenue responds so much more to tariffs.

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Document Object Identifier (DOI): 10.3386/w19968

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