Exports, real exchange rates and dollarization: empirical evidence from Turkish manufacturing firms
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Exports, real exchange rates and dollarization: empirical evidence from Turkish manufacturing firms Nazlı Karamollaoglu ˘ 1 · Cihan Yalçin2 Received: 7 February 2017 / Accepted: 7 May 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract We attempt to uncover the relationship between the real exchange rates and exports shares of manufacturing firms in Turkey by taking into account FX exposures and various firm characteristics. We use a large panel of manufacturing firms to carry out an empirical analysis for the period 2002–2010. Contrary to macro-evidence, firmlevel empirical evidence suggests that a depreciation of the Turkish lira seems to favor the external competitiveness of firms in general. We document that a real depreciation of the Turkish lira has a positive impact on export shares and its impact is muted to some extent for firms operating in sectors that use imported inputs intensively. In addition, we estimate that export shares increase as a result of real depreciation for firms having low (naturally hedged) and moderate FX debt-to-export ratios. We do not confirm a strong balance sheet channel where a depreciation of the currency may harm firms’ export performance due to currency mismatch. On the contrary, FX borrowing is estimated to support export performance probably due to undermining finance constraints. Keywords Exports · Exchange rates · Currency mismatch · Firm characteristics JEL Classification F23 · F31 · G15 · G31 · G32
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Nazlı Karamollao˘glu [email protected] Cihan Yalçin [email protected]
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Department of Economics, Faculty of Economics, Administrative and Social Sciences, MEF University, 34396 Sarıyer, Turkey
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Central Bank of the Republic of Turkey, 06050 Ankara, Turkey
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N. Karamollaoglu, ˘ C. Yalçin
1 Introduction Recent empirical trade literature has extensively studied the role of access to finance in promoting exports. However, thus far it has paid little attention to the possible effects of foreign currency (FX) exposures on the export performance and its implications for the exchange rate elasticity of exports. There are few studies, both at macro- or firm level, in the literature that analyze the role of FX debt when investigating the impact of exchange rate variations on the export performance. Among those, Berman and Berthou (2009) put forward that currency depreciation has a negative impact on exports if firms borrow heavily in foreign currency. Similarly, Berman and Héricourt (2011) document that currency depreciation increases probability of exporting to a lesser extent when FX debt is present. Our paper builds upon the existing literature by focusing on the effects of exchange rate variations on firms’ export shares (the ratio of exports to sales), by taking into account the role of FX exposures, particularly FX-denominated debts and imported inputs, using a large sample of manufacturing firms in Turkey.1 Three channels are often mentioned in the literature, through which real exchange rate affects exports namely the competitivene
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