Corporate Investment and the Real Exchange Rate

48 Pages Posted: 20 Feb 2018

See all articles by Mai Dao

Mai Dao

International Monetary Fund (IMF)

Camelia Minoiu

Federal Reserve Board

Jonathan D. Ostry

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2017

Abstract

We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.

Keywords: Real exchange rates, Corporate investment, Wages, Emerging markets, Developed countries, Exchange rate depreciation, labor share, real exchange rate, real effects of depreciation, General

JEL Classification: E21, E22, O40, O4

Suggested Citation

Dao, Mai and Minoiu, Camelia and Ostry, Jonathan D., Corporate Investment and the Real Exchange Rate (August 2017). IMF Working Paper No. 17/183. Available at SSRN: https://ssrn.com/abstract=3124372

Mai Dao (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Camelia Minoiu

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jonathan D. Ostry

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
28
Abstract Views
218
PlumX Metrics