Exporters and shocks

We use micro data for Ireland to estimate the responses of export entry, export exit, and the export revenue of incumbent exporters to changes in tariffs and real exchange rates. Entry and revenue are much more responsive to tariffs than they are to real exchange rates. Our estimates translate into an elasticity of aggregate exports with respect to tariff changes of between −1.5 and −3.5 on impact, and between −2 and −5 in the long run. Comparable elasticities for real exchange rate changes are around 0.5 on impact, and between 0.6 and 0.8 in the long run. These estimates are consistent with estimates in the literature based on aggregate data. They provide further evidence that workhorse models of international trade and business cycles which impose identical responses must be modified in order to answer policy questions touching on both international trade and the current account.