Currency Depreciation and the Intensive Margin of Export Trade: Firm and Product Level Evidence from Egypt

This paper explores the impact of currency depreciation on the firm-product-destination level exports of Egypt, using a rare dataset of monthly-transaction level custom data over the period 2005-2016. Using computed monthly real exchange rates and product-specific control variables, the empirical analysis is undertaken in two steps. First, we conduct aggregate-level estimations to investigate the response of the intensive margin of export trade to real depreciation in the Egyptian pound. Second, we run a series of heterogeneity analyses according to different data classifications such as exporter size, exported product type, region of export destinations, different time intervals in the sample period and finally the exported product’s sector, subsector (HS2) and their frequently exported product groups (HS4). Aggregate-level results confirm that the overall real depreciation affects export value in a positive and significant way, mainly driven by the higher magnitude of the positive effect on export quantity. Nevertheless, the heterogeneity analyses reveal that the response of exports is not homogenous among all data classifications. Hence, the framework of analysis used in this paper provides additional impetus for a better and more informed evaluation of product-specific export promoting policies in Egypt.