Exchange Rate Fluctuations and the Margins of Exports

38 Pages Posted: 1 Sep 2015

See all articles by Richard Fabling

Richard Fabling

Motu Economic and Public Policy Research Trust

Lynda Sanderson

Government of New Zealand - Treasury

Date Written: May 30, 2015

Abstract

This paper examines the relationship between exchange rate fluctuations and New Zealand export performance. To isolate the impact of the exchange rate, as opposed to contemporaneous (and related) fluctuations in New Zealand's economic performance or overseas market characteristics, we focus on bilateral export relationships at the firm level and control for both time-invariant country characteristics and changes in aggregate economic conditions. We examine two key margins of export adjustment – the probability of exporting (the extensive margin) and the average value of exports per firm (the intensive margin) – and distinguish between impacts on market incumbents and new or potential entrants. Finally, we specifically take account of the potential for interaction between the level and volatility of the exchange rate to affect exporting, as implied by theories of exchange rate hysteresis.

Keywords: Margins of exports, Hysteresis, Exchange rates

JEL Classification: D22, F14, F31

Suggested Citation

Fabling, Richard Blaikie and Sanderson, Lynda, Exchange Rate Fluctuations and the Margins of Exports (May 30, 2015). Available at SSRN: https://ssrn.com/abstract=2653468 or http://dx.doi.org/10.2139/ssrn.2653468

Richard Blaikie Fabling (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Lynda Sanderson

Government of New Zealand - Treasury ( email )

No. 1, The Terrace
Wellington, 6011
New Zealand

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