Exchange Rate Policy and Firm Heterogeneity

Masashige Hamano, Francesco Pappadà*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines the exchange rate policy in a tractable framework with heterogeneous firms, incomplete financial markets and nominal rigidities. External demand shocks generate exchange rate movements leading to uncertainty in the labor demand of exporter firms. When exporter firms are homogeneous in terms of productivity, a monetary policy response to external demand shocks stabilizes the export market and improves welfare, thus providing a rationale for managed exchange rate policies.

Original languageEnglish
Pages (from-to)759-790
Number of pages32
JournalIMF Economic Review
Volume71
Issue number3
DOIs
Publication statusPublished - 2023 Sept

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Economics, Econometrics and Finance(all)

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