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Title: Currency Shocks and Firm Behaviour in Ethiopia and Uganda

Author(s): Tewodros Gebrewolde, Michael Koelle, Pramila Krishnan and Andualem Telaye Mengistu

Publication Date: December 2020

Keyword(s): Currency of Invoicing and Currency shocks

Programme Area(s): Development Economics

Abstract: We examine the links between currency shocks and firm behaviour, with data from Ethiopia and Uganda, two countries with different exchange-rate regimes. We construct measures of currency shocks using matched customs and firm-level data, based on both the actual currency of invoicing and bilateral exchange rates. We find that currency depreciations based on the currency of invoicing to importers in Ethiopia lower the likelihood of using imported inputs, lower the share of imported inputs for firms, and lowers productivity. In contrast, there are no effects on any similar firm-level outcomes for Uganda. The use of bilateral currency shocks obtains confused results in both countries, signalling the value of using the currency of invoicing in this analysis.

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Bibliographic Reference

Gebrewolde, T, Koelle, M, Krishnan, P and Mengistu, A. 2020. 'Currency Shocks and Firm Behaviour in Ethiopia and Uganda'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15524