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Firm‐Level Heterogeneity and the Aggregate Exchange Rate Effect on Exports
Author(s) -
Dekle Robert,
Jeong Hyeok,
Ryoo Heajin H.
Publication year - 2016
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12276
Subject(s) - economics , elasticity (physics) , econometrics , exchange rate , estimation , aggregate (composite) , aggregate data , productivity , price elasticity of demand , monetary economics , microeconomics , macroeconomics , statistics , mathematics , materials science , management , composite material
We investigate what accounts for the different evidence between the aggregate and firm‐level data on the exchange rate elasticity of exports. The typical estimation of the macroeconomic export equations gives insignificant estimates for this elasticity compared to those from the recent firm‐level estimation. Using firm‐level data from Japan, we identify the sources of this discrepancy, and show that the failure to account for cost and demand factors as well as firm‐level productivity induces various kinds of biases for the aggregate estimate of the exchange rate elasticity of exports.