Working Paper
Financial Frictions and Export Dynamics in Large Devaluations
Abstract: We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms and endogenous export decisions in which firms face financing constraints and debt can be denominated in foreign units. Despite the negative impact of these channels on capital accumulation and output at the firm-level, we find that they only explain a modest fraction of the gradual increase of exports observed in these episodes. Exports increase since financially-constrained exporters are able to reallocate sales across markets. We show analytically the role of this mechanism on exports adjustment and document its importance using plant-level data.
Keywords: Financial frictions; large devaluations; export dynamics; balance-sheet effects;
JEL Classification: F1; F4; G32;
https://doi.org/10.20955/wp.2017.013
Access Documents
File(s):
File format is application/pdf
https://research.stlouisfed.org/wp/2017/2017-013.pdf
Description: Full text
File(s):
File format is text/html
https://doi.org/10.20955/wp.2017.013
Description: https://doi.org/10.20955/wp.2017.013
Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2019-09-13
Number: 2017-13
Pages: 34 pages