Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327708 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 12098
Publisher: 
Munich Society for the Promotion of Economic Research - CESifo GmbH, Munich
Abstract: 
This paper studies heterogeneous firm responses to a sudden trade-induced profitability shock -- the 2015 Swiss franc appreciation. Using firm-level investment data and a novel measure of exposure, we document that this trade shock causes large and persistent investment declines among affected firms. Examining heterogeneous responses among firms with similar exposure, we find that differences in responsiveness are not explained by economic fundamentals but are strongly linked to firm age and managerial experience. Younger firms and those led by less experienced managers react substantially more strongly. We argue that these empirical patterns are consistent with a model of Bayesian learning, in which firms update their beliefs about profitability over time. The results provide important insights into the long-lasting effects of trade shocks on business dynamism, capital investment, and local employment.
Subjects: 
trade shocks
firm-level investment
exchange rate shocks
JEL: 
F14
D22
G31
L25
Document Type: 
Working Paper
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