HOW THE COMPOSITION OF EXPORTS IS AFFECTED BY THE EXCHANGE RATE VOLATILITY IN BRAZIL

Abstract

Given the adoption of a floating exchange rate, after Bretton Woods’ monetary system collapse, many countries started to face an increase on exchange rate
variability, with several consequences for their economies. The main objective of this
study consists on analyzing the effects of the exchange rate volatility on the Brazilian
trade in a sectoral level, saying it differently, on the composition of Brazilian exports. For this purpose, the volume exported from Brazil to its main trading partners from 2001 to 2017 is considered, and, subsequently, the products are classified into three categories (basic, semi-manufactured and manufactured). From such a grouping, the composition of the exports is defined by the share of each product category in the total volume exported to the respective partners. Additionally, this variable was used as dependent in a gravity trade model, which was estimated by a pooled OLS, panel econometrics and PPML. Main results indicate that the exchange rate volatility has an adverse effect only on manufactured sector, with positive impact on exports of basic products and no significant impact on semi-manufactured exports.