Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan

Export responses to real exchange rate (RER) depreciations in Pakistan are lower than those to appreciations. This paper empirically documents this asymmetric response using macro-level data. It then relies on a disaggregated export product–level data set for 2003–17 to test, within a panel fix...

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Main Authors:	Brun, Martin, Gambetta, Juan Pedro, Varela, Gonzalo J.
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	TRADE AND INVESTMENT EXCHANGE RATE EXPORTS REAL EXCHANGE RATE EXPORT PERFORMANCE FINANCIAL DEPENDENCE PRICING TO MARKET THRESHOLD AUTOREGRESSIVE MODEL CURRENCY DEPRECIATION
Online Access:	http://documents.worldbank.org/curated/en/561931597063569779/Slow-Rockets-and-Fast-Feathers-or-the-Link-between-Exchange-Rates-and-Exports-A-Case-Study-for-Pakistan http://hdl.handle.net/10986/34350

id	okr-10986-34350
recordtype	oai_dc
spelling	okr-10986-343502022-09-20T00:11:05Z Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan Brun, Martin Gambetta, Juan Pedro Varela, Gonzalo J. TRADE AND INVESTMENT EXCHANGE RATE EXPORTS REAL EXCHANGE RATE EXPORT PERFORMANCE FINANCIAL DEPENDENCE PRICING TO MARKET THRESHOLD AUTOREGRESSIVE MODEL CURRENCY DEPRECIATION Export responses to real exchange rate (RER) depreciations in Pakistan are lower than those to appreciations. This paper empirically documents this asymmetric response using macro-level data. It then relies on a disaggregated export product–level data set for 2003–17 to test, within a panel fixed-effects framework, three hypotheses explaining the low export response to depreciations, focusing on information costs, supply constraints, and pricing to market. The analysis finds that (i) exports of differentiated products grow more slowly when the RER depreciates than they fall when it appreciates; (ii) exports from sectors with relatively greater supply constraints—in particular related to accessing finance- respond less to depreciations than to appreciations; and (iii) dollar prices for Pakistani exports tend to fall after nominal depreciations of the Pakistani rupee, in violation of the Dominant Currency Paradigm and consistent with pricing-to-market behavior, further accounting for the low response of exports to RER depreciations. 2020-08-13T14:42:04Z 2020-08-13T14:42:04Z 2020-08 Working Paper http://documents.worldbank.org/curated/en/561931597063569779/Slow-Rockets-and-Fast-Feathers-or-the-Link-between-Exchange-Rates-and-Exports-A-Case-Study-for-Pakistan http://hdl.handle.net/10986/34350 English Policy Research Working Paper;No. 9353 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia Pakistan
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	TRADE AND INVESTMENT EXCHANGE RATE EXPORTS REAL EXCHANGE RATE EXPORT PERFORMANCE FINANCIAL DEPENDENCE PRICING TO MARKET THRESHOLD AUTOREGRESSIVE MODEL CURRENCY DEPRECIATION
spellingShingle	TRADE AND INVESTMENT EXCHANGE RATE EXPORTS REAL EXCHANGE RATE EXPORT PERFORMANCE FINANCIAL DEPENDENCE PRICING TO MARKET THRESHOLD AUTOREGRESSIVE MODEL CURRENCY DEPRECIATION Brun, Martin Gambetta, Juan Pedro Varela, Gonzalo J. Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
geographic_facet	South Asia Pakistan
relation	Policy Research Working Paper;No. 9353
description	Export responses to real exchange rate (RER) depreciations in Pakistan are lower than those to appreciations. This paper empirically documents this asymmetric response using macro-level data. It then relies on a disaggregated export product–level data set for 2003–17 to test, within a panel fixed-effects framework, three hypotheses explaining the low export response to depreciations, focusing on information costs, supply constraints, and pricing to market. The analysis finds that (i) exports of differentiated products grow more slowly when the RER depreciates than they fall when it appreciates; (ii) exports from sectors with relatively greater supply constraints—in particular related to accessing finance- respond less to depreciations than to appreciations; and (iii) dollar prices for Pakistani exports tend to fall after nominal depreciations of the Pakistani rupee, in violation of the Dominant Currency Paradigm and consistent with pricing-to-market behavior, further accounting for the low response of exports to RER depreciations.
format	Working Paper
author	Brun, Martin Gambetta, Juan Pedro Varela, Gonzalo J.
author_facet	Brun, Martin Gambetta, Juan Pedro Varela, Gonzalo J.
author_sort	Brun, Martin
title	Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
title_short	Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
title_full	Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
title_fullStr	Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
title_full_unstemmed	Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan
title_sort	slow rockets and fast feathers or the link between exchange rates and exports : a case study for pakistan
publisher	World Bank, Washington, DC
publishDate	2020
url	http://documents.worldbank.org/curated/en/561931597063569779/Slow-Rockets-and-Fast-Feathers-or-the-Link-between-Exchange-Rates-and-Exports-A-Case-Study-for-Pakistan http://hdl.handle.net/10986/34350
_version_	1764480715204853760

Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan

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