Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/77468 
Year of Publication: 
2011
Series/Report no.: 
Graduate Institute of International and Development Studies Working Paper No. 14/2011
Publisher: 
Graduate Institute of International and Development Studies, Geneva
Abstract: 
How do firms' sales interact across markets? Are foreign and domestic sales complements or substitutes? Using a large French firm-level database that combine balance-sheet and product-destination-specific export information over the period 1995-2001, we study the interconnections between exports and domestic sales. We identify exogenous shocks that affect firm demand on foreign markets to instrument yearly variations in exports. Our results show that exogenous variations in foreign sales are positively associated with domestic sales, even after controlling for changes in domestic demand. A 10% exogenous increase in exports generates a 1.5 to 3% increase in domestic sales in the short-term. This result is robust to various estimation techniques, instruments, controls, and sub-samples. It is also supported by the natural experiment of the Asian crisis in the late 1990's. We discuss various channels that may explain this complementarity.
Subjects: 
export dynamics
domestic sales
liquidity
JEL: 
F1
F14
F44
L2
Document Type: 
Working Paper

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