Exporters and Shocks: Dissecting the International Elasticity Puzzle

37 Pages Posted: 19 Mar 2014

See all articles by Doireann Fitzgerald

Doireann Fitzgerald

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Stefanie Haller

University College Dublin (UCD)

Date Written: March 2014

Abstract

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.

Suggested Citation

Fitzgerald, Doireann and Haller, Stefanie, Exporters and Shocks: Dissecting the International Elasticity Puzzle (March 2014). NBER Working Paper No. w19968, Available at SSRN: https://ssrn.com/abstract=2411273

Doireann Fitzgerald (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

Stefanie Haller

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

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