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dc.titleCurrency Risk Premia and Exporter Dynamics
dc.contributor.authorJuvenal, Luciana
dc.contributor.authorSantos Monteiro, Paulo
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageColombia
dc.date.available2025-04-08T00:04:00
dc.date.issue2025-04-08T00:04:00
dc.description.abstractWe propose a novel mechanism to explain the incomplete pass-through of exchange rates to exporter prices and quantities, based on the relationship between exporters' dynamic pricing strategies and currency risk premia. When domestic currency risk premium increases, the relative value of current foreign currency cash flows rises compared to future ones. Consequently, exporters who set prices in customer markets are inclined to increase markups today, leading to higher prices in response to elevated risk premia. This risk-based explanation provides a new perspective on the exchange rate disconnect puzzle, suggesting that a higher currency risk premium dampens the direct impact of exchange rate changes on export prices. We test this mechanism empirically using firm-product level data from Colombian exporters on prices and quantities.
dc.format.extent62
dc.identifier.doihttp://dx.doi.org/10.18235/0013491
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Currency-Risk-Premia-and-Exporter-Dynamics.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectExchange Rate
dc.subjectSmall Business
dc.subjectExport Activity
dc.subjectIntegration and Trade
dc.subjectForest Resource
dc.subjectExport Market
dc.subjectCurrency Crisis
dc.subject.jelcodeF12 - Models of Trade with Imperfect Competition and Scale Economies • Fragmentation
dc.subject.jelcodeF14 - Empirical Studies of Trade
dc.subject.jelcodeF31 - Foreign Exchange
dc.subject.keywordsExchange rate pass-through;Currency Risk Premia;Customer Markets
idb.identifier.pubnumberIDB-DP-01089
idb.operationRG-K1089
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