Do export responses to exchange rate movements differ in micro export flows?

Abstract

This paper empirically examines how exports respond to exchange rate movements (exchange rate and exchange rate volatility) at the micro and macro levels using Turkey’s bilateral export data with 65 partner countries. Panel data contaninig 65 cross-sectional dimensions and 60 monthly time series dimensions from 2018:01 to 2022:12 are used. The empirical results of the Poisson Pseudo Maximum Likelihood (PPML) technique show that the negative effect of exchange rate volatility on micro export flows is amplified. Moreover, the potential positive effect of the exchange rate on micro export flows is weaker. Our findings are robust against the alternative method of exchange rate volatility and nominal exchange rate volatility. Our results are also intact under alternative robustness tests. The paper provides notable policy implications. Policymakers should be aware of the potential structural differences between micro and macro exports. Therefore, policymakers should also consider other aspects such as cross-border e-commerce when formulating economic policies on microexports.

KEYWORDS:

• Exports
• micro exports
• cross border electronic commerce

JEL Classifications:

• C33
• F13
• L81

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In Turkey, the maximum limit of 15,000 euros and 300 kilograms for one delivery exists to utilize simplified customs procedures.

2 For the sake of robustness, we have used ARCH /GARCH models to obtain exchange rate volatility in addition to the moving average standard deviation approach.