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Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan (Inglês)

Export responses to real exchange rate (RER) depreciations in Pakistan are lower than those to appreciations. This paper empirically documents this asymmetric response using macro-level data. It then relies on a disaggregated export product–level data set for 2003-17 to test, within a panel fixed-effects framework, three hypotheses explaining the low export response to depreciations, focusing on information costs, supply constraints, and pricing to market. The analysis finds that (i) exports of differentiated products grow more slowly when the RER depreciates than they fall when it appreciates; (ii) exports from sectors with relatively greater supply constraints -- in particular related to accessing finance- respond less to depreciations than to appreciations; and (iii) dollar prices for Pakistani exports tend to fall after nominal depreciations of the Pakistani rupee, in violation of the Dominant Currency Paradigm and consistent with pricing-to-market behavior, further accounting for the low response of exports to RER depreciations.

Detalhes

  • Autor

    Brun,Martin, Gambetta,Juan Pedro, Varela,Gonzalo J.

  • Data do documento

    2020/08/10

  • TIpo de documento

    Documento de trabalho sobre pesquisa de políticas

  • No. do relatório

    WPS9353

  • Nº do volume

    1

  • Total Volume(s)

    1

  • País

    Madagascar,

  • Região

    Sul da Ásia,

  • Data de divulgação

    2020/08/10

  • Disclosure Status

    Disclosed

  • Nome do documento

    Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan

  • Palavras-chave

    trade and investment; effect of exchange rate change; bilateral real exchange rate; long-run equilibrium; long-run relationship; nominal effective exchange rate; nominal bilateral exchange rate; put in motion; real effective exchange rate; degree of market power; short-run dynamics; investment need; balance of payment crisis; change in exchange rate; access to finance; speed of adjustment; nominal exchange rate; differentiated products; elasticity of export; error correction model; exchange rate depreciation; parameter of interest; supply constraint; error correction term; expansion of export; classification product; foreign currency price; exchange rate volatility; competitive exchange rate; exchange rate devaluation; value of exports; exchange rate movement; increase in labor; demand for labor; investment in plant; linear probability model; indicators of access; loose monetary policy; net present value; dominant currency; personal protective equipment; export of products; customs clearance time; terms of trade; exchange rate fluctuation; imperfect capital markets; social research institute; trading partner; homogenous product; world income; Exchange Rates; real depreciation; export quantity; financial dependence; labor intensity; export price; pakistani rupee; differential impact; price competitiveness; reference price; information cost; downward adjustment; export finance; foreign buyer; global income; dollar price; ceteris paribus; External Finance; export capacity; trade flow; industry concentration; domestic finance; credit constraint; foreign ownership; price rigidity; separate category; goods trade; conventional wisdom; macro level; real appreciation; homogenous good; product level; outstanding loan; weighted average; pricing strategy; long-term investment; currency depreciation; small sample; export performance; 0 hypothesis; export growth; export experience; market behavior; long-term relationship; increased export; restricted model; empirical evidence; nominal depreciation; imported inputs; capital expenditure; international market; external fund; recent studies; exportable goods; var model; export financing; open access; import price; literature review; domestic currencies; foreign exchange; short-term financing; domestic economy; foreign market; export value; adjustment process; production cost; international transaction; foreign competitor; internal fund; empirical literature; greater access; Research Support; macro data; empirical study; integration framework; data availability; new client; common language; lower price; price taker; cotton yarn; export data; building relationship; credit market; beer industry; working capital; price rise; concessional basis; alternative specification; development policy; export product; small economy; market integration; price transmission; output price; input price; currency overvaluation; domestic production; price index; information barriers; International Trade; supply response; export volume; institutional framework; negative value; time t; export sector; negative shock; positive shock; positive value; financial structure; bankruptcy cost; baseline model; export market; global market; foreign trade; new market; Trade Policies; explanatory variable; Trade Policy; export competitiveness; firm-level exports; downward movement; alternative measure; finance access; entry cost; market information; variable cost; exporting firms; output reduction; correlation coefficient; external capital; search cost; new product; relative price; term finance; overseas buyer; implicit price; production process; equilibrium condition; real export; export success; capital intensity; long-term finance; long-term financing; electrical machinery; supply capacity; domestic bank; statistical significance; sale expansion; other sectors; labor-intensive sectors; domestic credit; market demand; robustness check; resource availability; merchandise export; product differentiation; labor use

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