Centre for Development Economics
Department of Economics, Delhi School of Economics


Real Effective Exchange Rate and Manufacturing Sector Performance: Evidence from Indian firms


Anubha Dhasmana

IIM, Bangalore

Thursday, 12th September 2013 at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited


We explore the impact of Real Exchange Rate changes on the performance of Indian manufacturing firms over the period 2000-2012. Our empirical analysis shows that real exchange rate movements have a significant impact on Indian firms’ performance through the cost as well as the revenue channel. The impact depends upon the share of imports & exports along with the degree of market power as reflected in the time varying firm level mark up. However, presence of overvaluation negates the beneficial effects of exchange rate appreciation operating through the lower input cost channel. The same cannot be said about the ‘price competitiveness’ effect working through the export channel.


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