The Colombian peso depreciation of 2014-2015 and the adjustment of trade in the manufacturing sector

Autor o Editor
Juan Esteban Carranza
Camila Casas
Alejandra González

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc)

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Abstract

This paper documents the adjustment of international trade for the Colombian manufacturing sector following the 2014-2105 depreciation of the peso. We combine detailed information on trade with firm-level balance sheet and credit data, and we analyze the response of exports and imports at the macro-, firm-, and product-level to the exchange rate shock. The evidence indicates that export and import prices are sticky in dollars, and therefore the depreciation triggered a relatively rapid contractionary response from imports, whereas the response from exports was slower and weaker. Our micro-level analyses of the combined data suggest that the muted response of exports is associated with exporting firms’ reliance on imported imports, and with their preexisting higher debt, as predicted by the literature on balance sheet effects.