Federal Reserve Bank of St. Louis
Financial Frictions and Export Dynamics in Large Devaluations
We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms, where firms face financing constraints and debt can be denominated in foreign units. We find that these channels can explain only a small fraction of the dynamics of exports observed in the data. While these frictions distort production and investment decisions, they affect exports significantly less since firms reallocate sales across markets in response to real exchange rate changes. We document the importance of this mechanism using plant-level data.
Cite this item
David Kohn & Fernando Leibovici & Michal Szkup, Financial Frictions and Export Dynamics in Large Devaluations, Federal Reserve Bank of St. Louis, Working Papers 2017-13, 01 May 2017.
- F1 - International Economics - - Trade
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Keywords: Financial frictions; large devaluations; export dynamics; balance-sheet effects.
This item with handle RePEc:fip:fedlwp:2017-013
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