The impact of exchange rate volatility on plant-level investment: Evidence from Colombia
We estimate the impact of exchange rate volatility on firms' investment decisions in a developing country setting. Employing plant-level panel data from the Colombian Manufacturing Census, we estimate a dynamic investment equation using the system-GMM estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998). We find a robust negative impact of exchange rate volatility, constructed either using a GARCH model or a simple standard deviation measure, on plant investment. Consistent with theory, we also document that the negative effect is mitigated for establishments with higher mark-up or exports, and exacerbated for lower mark-up plants with larger volume of imported intermediates.
Year of publication: |
2011
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Authors: | Kandilov, Ivan T. ; Leblebicioglu, AslI |
Published in: |
Journal of Development Economics. - Elsevier, ISSN 0304-3878. - Vol. 94.2011, 2, p. 220-230
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Publisher: |
Elsevier |
Subject: | Exchange rate volatility Investment Colombia |
Saved in:
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