Harald Fadinger, University of Mannheim

Department seminar. Harald Fadinger is an Associate Professor of International Economics at the University of Mannheim. He will present a paper entitled "The Real Exchange Rate, Innovation and Productivity: Regional Heterogeneity, Asymmetries and Hysteresis", co-authored by Laura Alfaro, Alejandro Cuñat and Yanping Liu.

Photo of Fadinger.

Harald Fadinger.

Abstract

We evaluate manufacturing firms’ responses to changes in the real exchange rate (RER) using detailed firm-level data for a large set of countries for the period 2001-2010. We uncover the following stylized facts: In export-oriented emerging Asia, real depreciations are associated with faster growth of firm level TFP, higher sales and cash-flow, and higher probabilities to engage in R&D and to export. We find negative effects for firms in other emerging economies, which are relatively more import dependent, and no significant e↵ects for firms in industrialized economies. Motivated by these facts, we build a dynamic model in which real depreciations raise the cost of importing intermediates, a↵ect demand, borrowing constraints and the profitability of engaging in innovation (R&D). We decompose the e↵ects of RER changes on productivity growth across regions into these channels. We estimate the model and quantitatively evaluate the di↵erent mechanisms by providing counterfactual simulations of temporary RER movements and conduct several robustness analyses. Effects on physical TFP growth, while different across regions, are non-linear and asymmetric.

Read the paper here (.pdf)

Host: Inga Heiland

Published June 29, 2018 3:24 PM - Last modified Nov. 16, 2018 9:14 AM