Export Dynamics in Large Devaluations

HKIMR Working Paper No.06/2013

48 Pages Posted: 11 May 2013

See all articles by George Alessandria

George Alessandria

Federal Reserve Bank of Philadelphia

Sangeeta Pratap

Dept. of Economics Hunter College and Graduate Center, CUNY

Vivian Z. Yue

Emory University; Federal Reserve Bank of Atlanta

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2013

Abstract

This paper studies export dynamics in emerging markets following large devaluations. We document two main features of exports that are puzzling for standard trade models. First, given the change in relative prices, exports tend to grow gradually following a devaluation. Second, high interest rates tend to suppress exports. To address these features of export dynamics, we embed a model of endogenous export participation due to sunk and per period export costs into an otherwise standard small open economy. In response to shocks to productivity, interest rates, and the discount factor, we find the model can capture the salient features of export dynamics documented. At the aggregate level, the features giving rise to sluggish export dynamics leading to more gradual net export dynamics, sharper contractions in output, and endogenous declines in labor productivity.

Keywords: Export Dynamics, Devaluation, Net Exports

JEL Classification: E31, F12

Suggested Citation

Alessandria, George A. and Pratap, Sangeeta and Yue, Vivian, Export Dynamics in Large Devaluations (April 26, 2013). HKIMR Working Paper No.06/2013. Available at SSRN: https://ssrn.com/abstract=2263138 or http://dx.doi.org/10.2139/ssrn.2263138

George A. Alessandria

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
(215) 574-6402 (Phone)
(215) 574-4364 (Fax)

Sangeeta Pratap

Dept. of Economics Hunter College and Graduate Center, CUNY ( email )

695 Park Avenue
New York, NY 10021
United States

Vivian Yue (Contact Author)

Emory University ( email )

1602 Fishburne Dr
Atlanta, GA 30327
United States

HOME PAGE: http://vivianyue.com

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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