American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Multi-Product Firms and Exchange Rate Fluctuations
American Economic Journal: Economic Policy
vol. 5,
no. 2, May 2013
(pp. 77–110)
Abstract
This paper studies the effect of exchange rate shocks on export behavior of multi-product firms. We provide a theoretical framework illustrating how firms adjust their prices, quantities, product scope, and sales distribution across products in the event of exchange rate fluctuations. In response to a real exchange rate depreciation, firms increase markups for all products, but markup increases decline with firm-product-specific marginal costs of production. We find robust evidence for our theoretical predictions using Brazilian customs data containing destination-specific and product-specific export sales and quantities. The sample period covers the years 1997-2006, during which Brazil experienced a series of drastic currency fluctuations. (JEL F14, F31, F33, O19, O24)Citation
Chatterjee, Arpita, Rafael Dix-Carneiro, and Jade Vichyanond. 2013. "Multi-Product Firms and Exchange Rate Fluctuations." American Economic Journal: Economic Policy, 5 (2): 77–110. DOI: 10.1257/pol.5.2.77Additional Materials
JEL Classification
- F14 Empirical Studies of Trade
- F31 Foreign Exchange
- F33 International Monetary Arrangements and Institutions
- O19 International Linkages to Development; Role of International Organizations
- O24 Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
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