GEP 17/09: Exchange rate effects on agricultural exports: Firm-level evidence from Pakistan

Abstract

This article uses a novel dataset from Pakistan for the recent period (2000–2013) to examine the effects of domestic currency depreciation on agricultural exports and investigate various channels of influence. It conducts an integrated analysis of prices and quantities, together with firm-level trade flows, by using the exchange rates of the actual currencies of invoicing at the transaction level. The study finds that exchange rate movement positively affects both intensive and extensive margins (IM and EM). The increase in the IM operates mainly through the channel of prices, whereas the response of quantities is relatively smaller. Moreover, depreciation improves the EM of firms and products and expands the client base within existing markets. These responses vary widely across products, markets, exporting experience, exchange rate regimes and invoicing currencies.

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Author

Salamat Ali

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