Exchange Rate Uncertainty and Export Decisions in the UK

Abstract

Using data on UK manufacturing firms, we examine the effects of exchange rate uncertainty on firm decisions on export market entry and export intensity. The use of micro data and new measures of exchange rate uncertainty enable us to test for hysteresis effects in a new way and to test the sensitivity of results to a range of different measures. The results show that exchange rate uncertainty has little effect on firms' export participation but a significant impact on export intensity. We find that industry heterogeneity is important and there would be serious problems of aggregation using pooling and aggregate data.• JEL Classification: D81, F23, F31, F36•

Export Commitment and the Global Financial Crisis: Perspectives from the New Zealand Wine Industry

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Exchange Rate Fluctuations and the Margins of Exports

“…8 Firm-level exchange rates are defined as either a weighted average of bilateral exchange rates with the firm's export partners in 1990 and 1994 (for exporters), or a weighted average of bilateral exchange rates with the top four export partners of other firms in the same industry (for non-exporters in both 1990 and 1994). The conditional variance of the exchange rate expected at In contrast to Campa (2004), Greenaway et al (2010) find that exchange rate uncertainty 9 affects export intensity among UK manufacturers, but not the export participation decision. Moreover, they suggest that the direction of uncertainty (whether the realised exchange rate is higher or lower than the expected exchange rate) influences the intensive margin effect.…”

“…uses the assumption that exchange rate volatility affects export propensity but not export intensity in order to motivate his use of a Heckman two-stage model. However, as noted above, there may be reasons why firms would choose to limit their exposure to a market in the face of exchange rate volatility while not completely withdrawing from that market -a hypothesis we wish to directly test Greenaway et al (2010). instead use simultaneous estimation via maximum likelihood, which they argue is more efficient than a Heckman model.…”

Real Exchange Rate Volatility and Imports of Intermediate Inputs: A Microeconometric Analysis of Manufacturing Plants

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