Kiel Working Papers, Kiel Institute for World Economics
No 1531:
Sectoral R&D Intensity and Exchange Rate Volatility: A Panel Study for OECD Countries
Prashanth Mahagaonkar, Rainer Schweickert and Aditya S. Chavali
Abstract: A recent literature has pointed at potential negative
effects of exchange rate volatility on innovation. In this paper, we
propose that there may be a direct effect as well as an indirect effect via
export activity. We test these hypotheses for sectoral R&D intensities
using OECD panel data for manufacturing and services sectors for 14 OECD
economies and the years 1987 - 2003. We find that the direct negative
effect of volatility is pronounced in manufacturing sector but is dominated
by the indirect effect via the export channel. Services do not face any
effects of volatility on R&D intensities. While it is not clear which
channel dominates our results confirm that there is a negative volatility
affect related to openness on a sectoral level
Keywords: R&D intensity, Innovation, Real Exchange Rate, Volatility, Exports, OECD-Countries; (follow links to similar papers)
JEL-Codes: E32,; F31,; O32; (follow links to similar papers)
29 pages, July 2009
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