This paper studies the effect of exchange rate shocks on export
behavior of multi-product firms. We provide a theoretical framework
illustrating how firms adjust their prices, quantities, product scope,
and sales distribution across products in the event of exchange rate
fluctuations. In response to a real exchange rate depreciation, firms
increase markups for all products, but markup increases decline with
firm-product-specific marginal costs of production. We find robust
evidence for our theoretical predictions using Brazilian customs data
containing destination-specific and product-specific export sales and
quantities. The sample period covers the years 1997-2006, during
which Brazil experienced a series of drastic currency fluctuations.
(JEL F14, F31, F33, O19, O24)
Chatterjee, Arpita, Rafael Dix-Carneiro, and Jade Vichyanond.
"Multi-Product Firms and Exchange Rate Fluctuations."
American Economic Journal: Economic Policy,
Empirical Studies of Trade
International Monetary Arrangements and Institutions
International Linkages to Development; Role of International Organizations
Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy