Currency Shocks and Firm Behaviour in Ethiopia and Uganda

34 Pages Posted: 23 Dec 2020

See all articles by Tewodros Gebrewolde

Tewodros Gebrewolde

University of Leicester

Michael Koelle

University of Oxford

Pramila Krishnan

University of Oxford - Department of Economics

Andualem Mengistu

Ethiopian Development Research Institute (EDRI)

Date Written: December 2020

Abstract

We examine the links between currency shocks and firm behaviour, with data from Ethiopia and Uganda, two countries with different exchange-rate regimes. We construct measures of currency shocks using matched customs and firm-level data, based on both the actual currency of invoicing and bilateral exchange rates. We find that currency depreciations based on the currency of invoicing to importers in Ethiopia lower the likelihood of using imported inputs, lower the share of imported inputs for firms, and lowers productivity. In contrast, there are no effects on any similar firm-level outcomes for Uganda. The use of bilateral currency shocks obtains confused results in both countries, signalling the value of using the currency of invoicing in this analysis.

Suggested Citation

Gebrewolde, Tewodros and Koelle, Michael and Krishnan, Pramila and Mengistu, Andualem, Currency Shocks and Firm Behaviour in Ethiopia and Uganda (December 2020). CEPR Discussion Paper No. DP15524, Available at SSRN: https://ssrn.com/abstract=3753924

Tewodros Gebrewolde (Contact Author)

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Michael Koelle

University of Oxford ( email )

Mansfield Road
Oxford, OX1 4AU
United Kingdom

Pramila Krishnan

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Andualem Mengistu

Ethiopian Development Research Institute (EDRI) ( email )

P.O. Box 2479
Addis Ababa
Ethiopia

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