University of Mannheim
Department of Economics
L7, 3-5, 68131 Mannheim, Germany
Institutional Affiliation: University of Mannheim
NBER Working Papers and Publications
|May 2018||The Real Exchange Rate, Innovation and Productivity: Heterogeneity, Asymmetries and Hysteresis|
with Laura Alfaro, Alejandro Cuñat, Harald Fadinger: w24633
We evaluate manufacturing firms' responses to changes in the real exchange rate (RER) using detailed firm-level data for a large set of countries for the period 2001-2010. We uncover the following stylized facts: In export-oriented emerging Asia, real depreciations are associated with higher firm-level probabilities to engage in R&D, faster growth of firm-level productivity and cash-flow and higher export entry rates. We find negative effects for firms in other emerging economies, which are relatively more import dependent, and no significant effects for firms in industrialized economies. Motivated by these facts, we build a dynamic model in which real depreciations raise the cost of importing intermediates, affect export demand, borrowing-constraints and the profitability of engaging in i...