Monetary shocks, exchange rates, and the extensive margin of exports
Cooke, Dudley
Date: 2012
Publisher
University of Exeter Business School
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Abstract
This paper develops a two-country Dynamic General Equilibrium model
to assess the relationship between the real exchange rate and the extensive margin of
exports. Exchange rate pass-through to consumer prices governs the relative strength
of a demand channel onto the exporting decision of a firm. With incomplete pass-
through, a favorable ...
This paper develops a two-country Dynamic General Equilibrium model
to assess the relationship between the real exchange rate and the extensive margin of
exports. Exchange rate pass-through to consumer prices governs the relative strength
of a demand channel onto the exporting decision of a firm. With incomplete pass-
through, a favorable movement in the real exchange rate generates increased export
participation and an expansion in the extensive margin of exports. This result is
consistent with firm-level studies, and contributes to an ongoing empirical debate as
to the importance of changes in export participation over the business cycle.
Economics
Faculty of Environment, Science and Economy
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