HOW DO DIFFERENT EXPORTERS REACT TO EXCHANGE RATE CHANGES?

This article analyzes the heterogeneous reaction of exporters to real exchange rate changes using a very rich French firm-level data set with destinationspecific export values and volumes on the period 1995-2005. We find that highperformance firms react to a depreciation by increasing significantly...

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Bibliographic Details
Published in:The Quarterly journal of economics 2012-02, Vol.127 (1), p.437-492
Main Authors: Berman, Nicolas, Martin, Philippe, Mayer, Thierry
Format: Article
Language:English
Subjects:
Data analysis
Depreciation
Distribution costs
Econometrics
Economic performance
Economic theory
Economics and Finance
Elasticity of demand
Exchange rates
Export prices
Export value
Exporters
Exports
Foreign exchange rates
France
Heterogeneity
Humanities and Social Sciences
Markups
Price elasticity
Pricing
Productivity
Real exchange rates
Studies
Western Europe
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Summary:This article analyzes the heterogeneous reaction of exporters to real exchange rate changes using a very rich French firm-level data set with destinationspecific export values and volumes on the period 1995-2005. We find that highperformance firms react to a depreciation by increasing significantly more their markup and by increasing less their export volume. This heterogeneity in pricingto-market is robust to different measures of performance, samples, and econometric specifications. It is consistent with models where the demand elasticity decreases with firm performance. Since aggregate exports are concentrated on high-productivity firms, precisely those that absorb more exchange rate movements in their markups, heterogeneous pricing-to-market may partly explain the weak impact of exchange rate movements on aggregate exports.
ISSN:0033-5533
1531-4650
DOI:10.1093/qje/qjr057