Export intermediaries and adjustments to exchange rate movements

Bolatto, Stefano ; Grazzi, Marco ; Tomasi, Chiara (2017) Export intermediaries and adjustments to exchange rate movements. Bologna: Dipartimento di Scienze economiche DSE, p. 35. DOI 10.6092/unibo/amsacta/5570. In: Quaderni - Working Paper DSE (2004). ISSN 2282-6483.
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Building on a heterogeneous-firm model à la Melitz (2003), we propose a theory of intermediaries in international trade which rationalizes the available evidence on both aggregate and firm-level exports as well as their responsiveness to exchange rate movements. We introduce double marginalization for goods traded indirectly, i.e. through intermediaries, and local distribution costs for all exporting firms, either intermediaries or direct exporters. This leads to heterogeneous markups, pricing-to-market and to a lower degree of exchange rate pass-through for goods exported by intermediaries. This result, validated on Italian firm-level trade data, is consistent with productivity sorting in the export mode and with the propensity of high productivity firms to absorb more exchange rate movements in their markups. We also explore how direct and intermediary export ows to a given destination react to exchange rate movements along the extensive margin of adjustment. Consistently with our theory, we find evidence of a larger variation in the overall number of varieties traded along the intermediary channel.

Document type
Monograph (Working Paper)
Bolatto, StefanoUniversità di Bologna0000-0003-0937-5258
Grazzi, MarcoUniversità di Bologna0000-0002-4196-6122
Tomasi, ChiaraUniversità di Trento0000-0002-1962-7351
international trade, firms heterogeneity, intermediaries, export entry costs, local distribution costs, heterogeneous markups, product adding and dropping, exchange rate pass-through
Deposit date
19 May 2017 07:29
Last modified
15 Feb 2018 10:10

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