Heterogeneous Effects of Exchange Rate on Imports: Exporters and Domestic Sellers

Heterogeneous Effects of Exchange Rate on Imports: Exporters and Domestic Sellers

25/18

Orhun Özel

English

December 2025

This study examines the import intensities of Turkish manufacturing firms following a large exchange rate shock. It focuses on the heterogeneities between exporters and domestic sellers in a difference-in-differences setup. The findings suggest that the exchange rate shock caused significant reductions in the import intensities of the investigated firms. The sudden depreciation affected domestic sellers considerably more than exporters, forcing them to decrease their imports and turn to local alternatives more than exporters. The study further explores the reasons for the differentiation by analyzing various firm characteristics. The results suggest that the difference between domestic sellers and exporters is prevalent for high technology sectors, for firms producing more complex products, and for firms producing lower domestic value-added products. In these groups, exporters do not switch to local alternatives as much as domestic sellers. The decision to switch to domestic alternatives is sensitive to the existence of suitable domestic substitutes for currently imported intermediate inputs, especially for exporters. Drawing on these findings, the paper attempts to make a macro-level inference about the import demand function in Türkiye and arrives at an estimate of 0.51 for the exchange rate elasticity of imports.

Trade balance, Import demand function, Exchange rate shock, Difference-in-differences, Heterogeneous firms

F14; F31; F49