Lionel Fontagné, Philippe Martin, Gianluca Orefice, 07 April 2017

With Brexit and the election of Donald Trump, tariffs and exchange rates are back at the centre stage of policy debates. This column revisits the assumptions economists make when estimating how tariffs and exchange rates affect exporters’ performance. It argues that the elasticity of firm-level exports to firm-level export prices is an important factor that should be taken into account. Using French firm-level data, it finds that exporters react even more strongly to firm-level electricity cost shocks than to tariff or exchange rate shocks.