The authors gratefully acknowledge financial support from the Leverhulme Trust under Programme Grant F/00 114/AM. The authors would also like to thank Peter Egger and an anonymous referee for valuable comments.
The Effect of Exchange Rates on Firm Exports: The Role of Imported Intermediate Inputs
Article first published online: 28 JUL 2010
© 2010 Blackwell Publishing Ltd
The World Economy
Special Issue: EUROPE SPECIAL ISSUE - HETEROGENEOUS FIRMS IN THE OPEN ECONOMY
Volume 33, Issue 8, pages 961–986, August 2010
How to Cite
Greenaway, D., Kneller, R. and Zhang, X. (2010), The Effect of Exchange Rates on Firm Exports: The Role of Imported Intermediate Inputs. World Economy, 33: 961–986. doi: 10.1111/j.1467-9701.2010.01308.x
- Issue published online: 28 JUL 2010
- Article first published online: 28 JUL 2010
In this paper we investigate the effect of exchange rate changes on the exports of UK manufacturing firms, but draw on the macro literature to consider the effects exchange rates have on imported intermediate inputs. Real exchange rate appreciations make the foreign export price of goods and services produced by domestic firms more expensive, but also make imported inputs cheaper. Our results provide support for this view; we find a significant negative effect from a measure of the export destination weighted real effective exchange rate and an offsetting effect from the imported intermediate input weighted exchange rate on export sales.