Export Surges : The Power of a Competitive Currency

How can countries stimulate and sustain strong export growth? To answer this question, the authors examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least seven years. They find that export surges in developing countries tend to be preceded by a large real depreciation-which leaves the exchange rate significantly undervalued-and a reduction in exchange rate volatility. In contrast, in developed countries, the role of the exchange rate is less pronounced. The authors examine why the exchange rate is so important in developing countries and find that the depreciation leads to a significant reallocation of resources in the export sector. In particular, depreciation generates more entries into new export products and new markets, and the percentage of new entries that fail after one year declines. These new products and new markets are important, accounting for 25 percent of export growth during the surge in developing countries. The authors argue that maintaining a competitive currency leads firms to expand the product and market space for exports, inducing a large reorientation of the tradable sector.

Bibliographic Details

Main Authors:	Freund, Caroline, Pierola, Martha Denisse
Language:	English
Published:	World Bank, Washington, DC 2008-10
Subjects:	ACCOUNTING, APARTHEID, ASSETS, AVERAGE GROWTH, BALANCE OF PAYMENTS, BALANCE OF PAYMENTS CRISES, BANK POLICY, BASE YEAR, BILATERAL TRADE, BILATERAL TRADE DATA, BLACK MARKET, BLACK MARKET EXCHANGE RATE, CENTRAL BANK, COMMODITY, COMMODITY PRICE, COMMODITY PRICE BOOMS, COMMON CURRENCY, COMPARATIVE ADVANTAGE, COMPETITIVENESS, CONSTANT DOLLARS, CONSUMER PRICE INDEX, CONSUMERS, CONSUMPTION EXPENDITURE, COUNTRY FIXED EFFECTS, COUNTRY LEVEL, COUNTRY SIZE, CROSS-COUNTRY STUDY, CURRENCY, CURRENCY DEPRECIATION, CURRENCY UNIONS, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, CURRENT ACCOUNT POSITION, DEBT, DEBT CRISIS, DEBT CRISIS COUNTRIES, DEPENDENT VARIABLE, DEPENDENT VARIABLES, DEPRECIATIONS, DEVALUATION, DEVALUATIONS, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT RESEARCH, DEVELOPMENT STRATEGY, DIMINISHING RETURNS, DISCRETE JUMP, DISTORTION, DOMESTIC CURRENCY, DOMESTIC DEMAND, DOMESTIC ECONOMY, DOMESTIC GOODS, DOMESTIC SAVING, DOMESTIC SAVINGS, DUMMY VARIABLE, ECONOMIC ACTIVITY, ECONOMIC BOOM, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC REFORM, ECONOMIC STUDIES, EFFECT OF EXCHANGE RATE CHANGES, EQUILIBRIUM, EQUILIBRIUM LEVEL, EQUIPMENT, EXCHANGE DEPRECIATION, EXCHANGE RATE, EXCHANGE RATE FLUCTUATIONS, EXCHANGE RATE MANAGEMENT, EXCHANGE RATE MISALIGNMENT, EXCHANGE RATE MOVEMENT, EXCHANGE RATE MOVEMENTS, EXCHANGE RATE POLICY, EXCHANGE RATE SHOCKS, EXCHANGE RATE VOLATILITY, EXCHANGE RATES, EXCHANGE-RATE, EXIT STRATEGIES, EXPENDITURE INCREASES, EXPORT DIVERSIFICATION, EXPORT GROWTH, EXPORT GROWTH RATES, EXPORT INCENTIVES, EXPORT MARKETS, EXPORT PROMOTION, EXPORT SECTOR, EXPORT SECTORS, EXPORT SHARE, EXPORT SUBSIDY, EXPORT VOLUMES, EXPORTER, EXPORTERS, EXTERNAL DEMAND, EXTERNAL INVESTORS, EXTERNALITY, FEDERAL RESERVE, FEDERAL RESERVE SYSTEM, FINANCIAL INTERMEDIATION, FIXED EFFECT, FIXED EFFECTS, FIXED EXCHANGE RATE, FLEXIBLE RATE, FOREIGN CURRENCY, FOREIGN DIRECT INVESTMENT, FOREIGN INCOME, FOREIGN INVESTMENT, FOREIGN MARKETS, FRANC ZONE, FUTURE RESEARCH, GDP, GLOBAL INTEGRATION, GOLD, GROWTH RATE, GROWTH RATES, GROWTH SPECIFICATION, HIGH GROWTH, IMPORT, IMPORT BARRIERS, IMPORT DEMAND, IMPORT GROWTH, IMPORT PRICES, IMPORT TARIFF, IMPORTS, INCOME GROWTH, INCREASING RETURNS, INDEPENDENT VARIABLE, INDUSTRIAL COUNTRIES, INDUSTRIALIZATION, INFLATION, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCE, INTERNATIONAL MONETARY SYSTEM, INTERNATIONAL MONEY, INTERNATIONAL TRADE, INVESTMENT RATE, LABOR FORCE, MACROECONOMICS, MANUFACTURING INDUSTRIES, MARKET FAILURE, MARKET SHARE, MONOPOLY, NEW MARKET, NEW MARKETS, NEW PRODUCTS, OPEN COUNTRIES, OPEN ECONOMIES, OPEN ECONOMY, OVERVALUATION, PERC, POLICY RESEARCH, POLICY STANCE, POLITICAL ECONOMY, POSTWAR PERIOD, POVERTY REDUCTION, PRICE INDEX, PRIVATE INVESTMENT, PRODUCTION STRUCTURE, RAPID GROWTH, RATE MOVEMENTS, REAL CONSUMPTION, REAL DEPRECIATION, REAL DEVALUATIONS, REAL EFFECTIVE EXCHANGE RATE, REAL EXCHANGE RATE, REAL EXCHANGE RATE MISALIGNMENT, REAL EXCHANGE RATES, REAL EXPORTS, REAL GDP, REGIME CHANGES, REGIONAL INTEGRATION, REGRESSION ANALYSIS, RELATIVE PRICES, RETURNS, SAVINGS RATE, SIGNIFICANT EFFECT, SMALL COUNTRIES, SMALL ECONOMIES, STANDARD DEVIATION, SUNK COSTS, TARIFF BARRIER, TARIFF BARRIERS, TAX, TAX INCENTIVES, TECHNICAL ASSISTANCE, TIME HORIZON, TOTAL EXPORTS, TOTAL IMPORTS, TRADE BARRIERS, TRADE DATA, TRADE EQUATIONS, TRADE LIBERALIZATION, TRADE LIBERALIZATIONS, TRADE PATTERNS, TRADE POLICIES, TRADE POLICY, TRADING, UNDERVALUATION, UNDERVALUED EXCHANGE RATE, UNEMPLOYMENT, VALUE ADDED, WAGES, WEALTH, WEIGHTS, WORLD TRADE, WORLD TRADE ORGANIZATION, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2008/10/9933586/export-surges-oower-competitive-currency-export-surges-power-competitive-currency https://hdl.handle.net/10986/6937
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