Multi-product firms and exchange rate fluctuations

Journal Article (Journal Article)

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.

Full Text

Duke Authors

Cited Authors

  • Chatterjee, A; Rafael, DC; Vichyanond, J

Published Date

  • May 1, 2013

Published In

Volume / Issue

  • 5 / 2

Start / End Page

  • 77 - 110

Electronic International Standard Serial Number (EISSN)

  • 1945-774X

International Standard Serial Number (ISSN)

  • 1945-7731

Digital Object Identifier (DOI)

  • 10.1257/pol.5.2.77

Citation Source

  • Scopus