A Firm-Level Examination of the Exports Puzzle: Why East Asian Exports Didn't Increase after the 1997-1998 Financial Crisis

21 Pages Posted: 20 Jan 2007

See all articles by Garrick Blalock

Garrick Blalock

Cornell University - School of Applied Economics and Management

Sonali Roy

Cornell University - Dyson School of Applied Economics and Management

Abstract

We analyse a detailed panel dataset on Indonesian manufacturing firms to characterise the exports puzzle: the surprising absence of export-led growth after the massive currency devaluation during the 1997-1998 Asian financial crisis. Our results show that, consistent with trade theory predictions following better terms of trade, entry into export markets increased dramatically. In conflict with the same predictions, however, many pre-crisis exporters quit exporting. Thus stagnant export growth cannot be attributable to a lack of entrepreneurial ambition or activity amongst would-be exporters. Rather, it apparently resulted from constraints prohibiting continued exporting by pre-crisis exporters. Managerial reports of perceived constraints reveal little about why so many firms ceased exporting. However, 'better' firms, as proxied by foreign ownership, involvement in research and development, or investment in training, were more likely to continue exporting post-crisis.

Suggested Citation

Blalock, Garrick and Roy, Sonali, A Firm-Level Examination of the Exports Puzzle: Why East Asian Exports Didn't Increase after the 1997-1998 Financial Crisis. The World Economy, Vol. 30, No. 1, pp. 39-59, January 2007, Available at SSRN: https://ssrn.com/abstract=958428 or http://dx.doi.org/10.1111/j.1467-9701.2007.00871.x

Garrick Blalock (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Sonali Roy

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

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