The Effect of Exchange Rate Shocks on Firm-Level Exports: Evidence from the Brexit Vote

33 Pages Posted: 22 Oct 2018

See all articles by Ana Fernandes

Ana Fernandes

University of Exeter

L. Alan Winters

University of Sussex; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2018


This paper exploits the abrupt and sharp depreciation of the British Pound after the Brexit referendum as a quasi-natural experiment to investigate the effect of exchange rate shocks on export quantity, price, entry and exit. We use transaction-level export data for the universe of exporters in Portugal. Using monthly observations on export quantity and price for the same firm exporting the same product to buyers in the UK and in other countries, allows us to cleanly identify the differential response to the shock for the UK market, relative to other markets. We find that exporters reduced their mark-up in the UK market after the referendum shock. Our estimates imply a large pricing-to-market coefficient and exchange rate pass-through. Exporters that are more productive adjust their mark-ups by more after the exchange rate shock, and have lower pass-through. There is more pricing-to-market for consumer goods than for intermediate inputs. Within the same firm-product, export quantity to the UK also decreased after the shock. The referendum shock reduced the rate of export entry to the UK market by Portuguese firms and the probability of their continuing to export in the UK.

Keywords: Brexit vote, exchange rate pass-through, exchange rate shocks, exports, extensive margin of trade, intensive margin of trade, pricing-to-market

JEL Classification: F14, F31, F32, F41

Suggested Citation

Fernandes, Ana and Winters, L. Alan Alan, The Effect of Exchange Rate Shocks on Firm-Level Exports: Evidence from the Brexit Vote (October 2018). CEPR Discussion Paper No. DP13253, Available at SSRN:

Ana Fernandes (Contact Author)

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

L. Alan Alan Winters

University of Sussex ( email )

Sussex House
Brighton, Sussex BNI 9RH
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics