{
  "title": "Quality, Trade, and Exchange Rate Pass-Through",
  "publication": "IMF Working Papers, March 12, 2014",
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  "summary": "This paper investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality.\n- Main theoretical result: the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, generating more pricing-to-market and a smaller response of export volumes to a real depreciation for higher quality goods.\n- Empirical test uses a highly disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined with experts wine rankings as a measure of quality.\n- Model predictions find strong support in the data; results are robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality."
    },
    {
      "heading": "Theoretical model and mechanisms",
      "content": "- Key mechanism:\n  - Elasticity of demand perceived by exporters decreases with a real depreciation.\n  - Elasticity of demand perceived by exporters decreases with quality.\n  - Implication: higher pricing-to-market behavior for higher quality goods.\n  - Implication: smaller response of export volumes to a real depreciation for higher quality goods."
    },
    {
      "heading": "Empirical approach and data",
      "content": "- Data:\n  - Highly disaggregated Argentinean firm-level wine export dataset.\n  - Time period covered: between 2002 and 2009.\n  - Quality measure: experts wine rankings.\n- Empirical strategy:\n  - Tests model predictions linking quality, pricing-to-market, and volume response to real depreciation.\n  - Addresses potential endogeneity of quality.\n  - Robustness exercises across different quality measures, samples, and specifications."
    },
    {
      "heading": "Main findings",
      "content": "- Strong empirical support for the model predictions:\n  - Higher quality goods exhibit more pricing-to-market.\n  - Higher quality goods show a smaller response of export volumes to a real depreciation.\n- Results robust to:\n  - Different measures of quality.\n  - Different sample selections.\n  - Different econometric specifications.\n  - Tests accounting for potential endogeneity of quality."
    },
    {
      "heading": "Subjects and keywords (as listed)",
      "content": "- Subject: Exchange rate adjustments, Exchange rates, Export prices, Exports, Foreign exchange, International trade, Prices, Real exchange rates\n- Keywords: customs data, Europe, Exchage rate pass-through, exchange rate, Exchange rate adjustments, Exchange rates, Export prices, export volume, exports, exports data, firms, Global, pricing-to-market, quality, Real exchange rates, standard deviation, unit value, unit values, WP\n\n---\n\n Content in this bundle\n\n- Wp1442\n  - Wp1442 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Wp1442 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/quality-trade-and-exchange-rate-pass-through-41416"
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    "Authors: Natalie Chen, Luciana Juvenal",
    "Published: March 12, 2014",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475526394.001",
    "Investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality.",
    "Main theoretical result: the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, generating more pricing-to-market and a smaller response of export volumes to a real depreciation for higher quality goods.",
    "Empirical test uses a highly disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined with experts wine rankings as a measure of quality.",
    "Model predictions find strong support in the data; results are robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality.",
    "Key mechanism:",
    "Data:",
    "Empirical strategy:",
    "Strong empirical support for the model predictions:",
    "Results robust to:",
    "Subject: Exchange rate adjustments, Exchange rates, Export prices, Exports, Foreign exchange, International trade, Prices, Real exchange rates",
    "Keywords: customs data, Europe, Exchage rate pass-through, exchange rate, Exchange rate adjustments, Exchange rates, Export prices, export volume, exports, exports data, firms, Global, pricing-to-market, quality, Real exchange rates, standard deviation, unit value, unit values, WP",
    "**Wp1442**"
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