Exchange Rate Movements, Firm-Level Exports and Heterogeneity

44 Pages Posted: 14 Feb 2018

See all articles by Antoine Berthou

Antoine Berthou

Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques; Paris School of Economics (PSE)

Emmanuel Dhyne

National Bank of Belgium

Date Written: January 2018


This paper provides an estimation of the reaction of firm-level exports consecutive to real exchange rate movements, the exchange rate elasticity of exports. Following recent theoretical works emphasizing the role played by firm heterogeneity, we test in particular how the exchange rate elasticity may be affected by firm-level productivity, and how the heterogeneous reaction of different firms may contribute to shape the aggregate reaction of countries' exports. The analysis relies on a unique cross-country micro-based dataset of exporters available for 11 European countries (2001-2011), which details in particular information about firms' productivity and export performance. Our results show that while the average exchange rate elasticity across firms is quite weak, it is also highly heterogeneous. The least productive firms within each country and sector tend to react more to real exchange rate movements than the most productive firms. This weak reaction of highly productive and large exporters tends to reduce the macroeconomic exchange rate elasticity in all countries. Cross-country differences in the shape of the productivity distribution among exporters have a strong influence on the macroeconomic exchange rate elasticity: countries populated with a higher density of low productive firms tend to respond more to exchange rate movements in terms of aggregate exports than countries populated with highly productive exporters.

Keywords: Firm-level exports, heterogeneity, exchange rates movements

JEL Classification: F12, F14, F31

Suggested Citation

Berthou, Antoine and Dhyne, Emmanuel, Exchange Rate Movements, Firm-Level Exports and Heterogeneity (January 2018). Banque de France Working Paper No. 660, Available at SSRN: or

Antoine Berthou (Contact Author)

Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques ( email )

106/112 boulevard de l'Hopital
Paris Cedex 13, 75647
(+33)144078211 (Phone)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014

Emmanuel Dhyne

National Bank of Belgium ( email )

Brussels, B-1000

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