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Journal of Economic Integration 2010 December;25(4) :734-753.
Exchange Rate Uncertainty and Export Decisions in the UK

David Greenaway Richard Kneller Xufei Zhang 

University of Nottingham
Middlesex University
Copyright ©2010 Journal of Economic Integration

Using data on UK manufacturing firms, we examine the effects of exchange rate uncertainty on firm decisions on export market entry and export intensity. The use of micro data and new measures of exchange rate uncertainty enable us to test for hysteresis effects in a new way and to test the sensitivity of results to a range of different measures. The results show that exchange rate uncertainty has little effect on firms' export participation but a significant impact on export intensity. We find that industry heterogeneity is important and there would be serious problems of aggregation using pooling and aggregate data.

JEL Classification: D81, F23, F31, F36

Keywords: Exchange Rate Uncertainty | Export Share | Hysteresis Effects
1. Baldwin, Richard. (1988), Hysteresis and the Beachhead Effect, American Economic Review, 78, pp. 773-85.
2. Baldwin, R. and Krugman, P. (1989), Persistent Trade Effects of Large Exchange Rate Shocks, Quarterly Journal of Economics, 104, pp. 635-54.
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