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Working Paper
Forward Looking Exporters
This paper studies the role of expectations in driving export adjustment. We assemble bilateral data on spot exchange rates, one year ahead exchange rate forecasts and HS2-product export data for 11 exporting countries and 64 destinations, covering the 2006–2014 period. Results from fixed effects regressions and an instrumental variables approach show that expectations of exchange rate changes are an important channel for export adjustment. A one percent expected exchange rate depreciation over the next year is associated with a 0.96 percent increase in the extensive margin (entry of new ...
Discussion Paper
Forward Looking Exporters
Economic textbooks outline a simple relationship between movements in a country’s exchange rate and its export volumes. When the exporter’s currency depreciates, export volumes are expected to increase due to competitiveness gains in foreign markets.