Freund, CarolinePierola, Martha Denisse2012-06-012012-06-012008-10https://hdl.handle.net/10986/6937How can countries stimulate and sustain strong export growth? To answer this question, the authors examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least seven years. They find that export surges in developing countries tend to be preceded by a large real depreciation-which leaves the exchange rate significantly undervalued-and a reduction in exchange rate volatility. In contrast, in developed countries, the role of the exchange rate is less pronounced. The authors examine why the exchange rate is so important in developing countries and find that the depreciation leads to a significant reallocation of resources in the export sector. In particular, depreciation generates more entries into new export products and new markets, and the percentage of new entries that fail after one year declines. These new products and new markets are important, accounting for 25 percent of export growth during the surge in developing countries. The authors argue that maintaining a competitive currency leads firms to expand the product and market space for exports, inducing a large reorientation of the tradable sector.CC BY 3.0 IGOACCOUNTINGAPARTHEIDASSETSAVERAGE GROWTHBALANCE OF PAYMENTSBALANCE OF PAYMENTS CRISESBANK POLICYBASE YEARBILATERAL TRADEBILATERAL TRADE DATABLACK MARKETBLACK MARKET EXCHANGE RATECENTRAL BANKCOMMODITYCOMMODITY PRICECOMMODITY PRICE BOOMSCOMMON CURRENCYCOMPARATIVE ADVANTAGECOMPETITIVENESSCONSTANT DOLLARSCONSUMER PRICE INDEXCONSUMERSCONSUMPTION EXPENDITURECOUNTRY FIXED EFFECTSCOUNTRY LEVELCOUNTRY SIZECROSS-COUNTRY STUDYCURRENCYCURRENCY DEPRECIATIONCURRENCY UNIONSCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT POSITIONDEBTDEBT CRISISDEBT CRISIS COUNTRIESDEPENDENT VARIABLEDEPENDENT VARIABLESDEPRECIATIONSDEVALUATIONDEVALUATIONSDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT RESEARCHDEVELOPMENT STRATEGYDIMINISHING RETURNSDISCRETE JUMPDISTORTIONDOMESTIC CURRENCYDOMESTIC DEMANDDOMESTIC ECONOMYDOMESTIC GOODSDOMESTIC SAVINGDOMESTIC SAVINGSDUMMY VARIABLEECONOMIC ACTIVITYECONOMIC BOOMECONOMIC GROWTHECONOMIC PERFORMANCEECONOMIC REFORMECONOMIC STUDIESEFFECT OF EXCHANGE RATE CHANGESEQUILIBRIUMEQUILIBRIUM LEVELEQUIPMENTEXCHANGE DEPRECIATIONEXCHANGE RATEEXCHANGE RATE FLUCTUATIONSEXCHANGE RATE MANAGEMENTEXCHANGE RATE MISALIGNMENTEXCHANGE RATE MOVEMENTEXCHANGE RATE MOVEMENTSEXCHANGE RATE POLICYEXCHANGE RATE SHOCKSEXCHANGE RATE VOLATILITYEXCHANGE RATESEXCHANGE-RATEEXIT STRATEGIESEXPENDITURE INCREASESEXPORT DIVERSIFICATIONEXPORT GROWTHEXPORT GROWTH RATESEXPORT INCENTIVESEXPORT MARKETSEXPORT PROMOTIONEXPORT SECTOREXPORT SECTORSEXPORT SHAREEXPORT SUBSIDYEXPORT VOLUMESEXPORTEREXPORTERSEXTERNAL DEMANDEXTERNAL INVESTORSEXTERNALITYFEDERAL RESERVEFEDERAL RESERVE SYSTEMFINANCIAL INTERMEDIATIONFIXED EFFECTFIXED EFFECTSFIXED EXCHANGE RATEFLEXIBLE RATEFOREIGN CURRENCYFOREIGN DIRECT INVESTMENTFOREIGN INCOMEFOREIGN INVESTMENTFOREIGN MARKETSFRANC ZONEFUTURE RESEARCHGDPGLOBAL INTEGRATIONGOLDGROWTH RATEGROWTH RATESGROWTH SPECIFICATIONHIGH GROWTHIMPORTIMPORT BARRIERSIMPORT DEMANDIMPORT GROWTHIMPORT PRICESIMPORT TARIFFIMPORTSINCOME GROWTHINCREASING RETURNSINDEPENDENT VARIABLEINDUSTRIAL COUNTRIESINDUSTRIALIZATIONINFLATIONINTERNATIONAL BANKINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL MONETARY SYSTEMINTERNATIONAL MONEYINTERNATIONAL TRADEINVESTMENT RATELABOR FORCEMACROECONOMICSMANUFACTURING INDUSTRIESMARKET FAILUREMARKET SHAREMONOPOLYNEW MARKETNEW MARKETSNEW PRODUCTSOPEN COUNTRIESOPEN ECONOMIESOPEN ECONOMYOVERVALUATIONPERCPOLICY RESEARCHPOLICY STANCEPOLITICAL ECONOMYPOSTWAR PERIODPOVERTY REDUCTIONPRICE INDEXPRIVATE INVESTMENTPRODUCTION STRUCTURERAPID GROWTHRATE MOVEMENTSREAL CONSUMPTIONREAL DEPRECIATIONREAL DEVALUATIONSREAL EFFECTIVE EXCHANGE RATEREAL EXCHANGE RATEREAL EXCHANGE RATE MISALIGNMENTREAL EXCHANGE RATESREAL EXPORTSREAL GDPREGIME CHANGESREGIONAL INTEGRATIONREGRESSION ANALYSISRELATIVE PRICESRETURNSSAVINGS RATESIGNIFICANT EFFECTSMALL COUNTRIESSMALL ECONOMIESSTANDARD DEVIATIONSUNK COSTSTARIFF BARRIERTARIFF BARRIERSTAXTAX INCENTIVESTECHNICAL ASSISTANCETIME HORIZONTOTAL EXPORTSTOTAL IMPORTSTRADE BARRIERSTRADE DATATRADE EQUATIONSTRADE LIBERALIZATIONTRADE LIBERALIZATIONSTRADE PATTERNSTRADE POLICIESTRADE POLICYTRADINGUNDERVALUATIONUNDERVALUED EXCHANGE RATEUNEMPLOYMENTVALUE ADDEDWAGESWEALTHWEIGHTSWORLD TRADEWORLD TRADE ORGANIZATIONWTOWorld Bank10.1596/1813-9450-4750