The Effect of Exchange Rates on Firm Exports: The Role of Imported Intermediate Inputs

26 Pages Posted: 2 Aug 2010

See all articles by David Greenaway

David Greenaway

University of Nottingham - School of Economics

Richard Kneller

University of Nottingham

Xufei Zhang

University of Nottingham

Abstract

In this paper we investigate the effect of exchange rate changes on the exports of UK manufacturing firms, but draw on the macro literature to consider the effects exchange rates have on imported intermediate inputs. Real exchange rate appreciations make the foreign export price of goods and services produced by domestic firms more expensive, but also make imported inputs cheaper. Our results provide support for this view; we find a significant negative effect from a measure of the export destination weighted real effective exchange rate and an offsetting effect from the imported intermediate input weighted exchange rate on export sales.

Suggested Citation

Greenaway, David and Kneller, Richard and Zhang, Xufei, The Effect of Exchange Rates on Firm Exports: The Role of Imported Intermediate Inputs. World Economy, Vol. 33, No. 8, pp. 961-986, August 2010. Available at SSRN: https://ssrn.com/abstract=1650866 or http://dx.doi.org/10.1111/j.1467-9701.2010.01308.x

David Greenaway

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5469 (Phone)
+44 115 951 4159 (Fax)

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Xufei Zhang

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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