Trade Policy and Exporters’ Resilience : Evidence from Indonesia

How does trade policy affect exporters’ ability to respond to foreign demand shocks Faced with a sudden change in the demand for their goods, exporting firms must optimally change their inputs and/or input sources. This paper tests whether a countr...

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Main Authors:	Cali, Massimiliano, Ghose, Devaki, Montfaucon, Angella Faith, Ruta, Michele
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2022
Subjects:	TRADE POLICY EXCHANGE RATE SHOCK GLOBAL VALUE CHAIN RESILIENCE ACCESS TO IMPORTED INPUTS DEMAND RESILIENCE SUPPLY CHAIN ACCESS TARIFF ECONOMIC SHOCK MARKET ADJUSTMENT MARKET ACCESS
Online Access:	http://documents.worldbank.org/curated/en/099740005262220422/IDU06f1f303907f49043730a1f80c37ca333161d http://hdl.handle.net/10986/37489

id	okr-10986-37489
recordtype	oai_dc
spelling	okr-10986-374892022-06-01T05:10:38Z Trade Policy and Exporters’ Resilience : Evidence from Indonesia Cali, Massimiliano Ghose, Devaki Montfaucon, Angella Faith Ruta, Michele TRADE POLICY EXCHANGE RATE SHOCK GLOBAL VALUE CHAIN RESILIENCE ACCESS TO IMPORTED INPUTS DEMAND RESILIENCE SUPPLY CHAIN ACCESS TARIFF ECONOMIC SHOCK MARKET ADJUSTMENT MARKET ACCESS How does trade policy affect exporters’ ability to respond to foreign demand shocks Faced with a sudden change in the demand for their goods, exporting firms must optimally change their inputs and/or input sources. This paper tests whether a country’s own trade policy makes such adjustments harder for firms that rely on imported inputs. The analysis exploits new time-varying data on tariffs and non-tariff measures faced by Indonesian firms and focuses on the impact of exchange rate shocks on exports to Japan. In response to a depreciation of the yuan, which makes Chinese exports more competitive, the findings show that firms that face non-tariff measures on their inputs see a much larger drop in their export values compared to firms that do not face any non-tariff measures. That is not the case for import tariffs on inputs, which do not affect the export response to the shock. This difference is consistent with the (partial) fixed costs imposed by non-tariff measures on imports in contrast to the pure variable costs of tariffs. The magnitude of this effect depends on the type of non-tariff measure and on firms’ characteristics, such as their participation in global value chains, size, and product quality. 2022-05-31T18:32:09Z 2022-05-31T18:32:09Z 2022-05 Working Paper http://documents.worldbank.org/curated/en/099740005262220422/IDU06f1f303907f49043730a1f80c37ca333161d http://hdl.handle.net/10986/37489 English Policy Research Working Paper;10068 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Policy Research Working Paper Publications & Research Indonesia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	TRADE POLICY EXCHANGE RATE SHOCK GLOBAL VALUE CHAIN RESILIENCE ACCESS TO IMPORTED INPUTS DEMAND RESILIENCE SUPPLY CHAIN ACCESS TARIFF ECONOMIC SHOCK MARKET ADJUSTMENT MARKET ACCESS
spellingShingle	TRADE POLICY EXCHANGE RATE SHOCK GLOBAL VALUE CHAIN RESILIENCE ACCESS TO IMPORTED INPUTS DEMAND RESILIENCE SUPPLY CHAIN ACCESS TARIFF ECONOMIC SHOCK MARKET ADJUSTMENT MARKET ACCESS Cali, Massimiliano Ghose, Devaki Montfaucon, Angella Faith Ruta, Michele Trade Policy and Exporters’ Resilience : Evidence from Indonesia
geographic_facet	Indonesia
relation	Policy Research Working Paper;10068
description	How does trade policy affect exporters’ ability to respond to foreign demand shocks Faced with a sudden change in the demand for their goods, exporting firms must optimally change their inputs and/or input sources. This paper tests whether a country’s own trade policy makes such adjustments harder for firms that rely on imported inputs. The analysis exploits new time-varying data on tariffs and non-tariff measures faced by Indonesian firms and focuses on the impact of exchange rate shocks on exports to Japan. In response to a depreciation of the yuan, which makes Chinese exports more competitive, the findings show that firms that face non-tariff measures on their inputs see a much larger drop in their export values compared to firms that do not face any non-tariff measures. That is not the case for import tariffs on inputs, which do not affect the export response to the shock. This difference is consistent with the (partial) fixed costs imposed by non-tariff measures on imports in contrast to the pure variable costs of tariffs. The magnitude of this effect depends on the type of non-tariff measure and on firms’ characteristics, such as their participation in global value chains, size, and product quality.
format	Working Paper
author	Cali, Massimiliano Ghose, Devaki Montfaucon, Angella Faith Ruta, Michele
author_facet	Cali, Massimiliano Ghose, Devaki Montfaucon, Angella Faith Ruta, Michele
author_sort	Cali, Massimiliano
title	Trade Policy and Exporters’ Resilience : Evidence from Indonesia
title_short	Trade Policy and Exporters’ Resilience : Evidence from Indonesia
title_full	Trade Policy and Exporters’ Resilience : Evidence from Indonesia
title_fullStr	Trade Policy and Exporters’ Resilience : Evidence from Indonesia
title_full_unstemmed	Trade Policy and Exporters’ Resilience : Evidence from Indonesia
title_sort	trade policy and exporters’ resilience : evidence from indonesia
publisher	World Bank, Washington, DC
publishDate	2022
url	http://documents.worldbank.org/curated/en/099740005262220422/IDU06f1f303907f49043730a1f80c37ca333161d http://hdl.handle.net/10986/37489
_version_	1764487307182735360

Trade Policy and Exporters’ Resilience : Evidence from Indonesia

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