Latest revision as of 14:50, 22 September 2023

Abstract

The paper analyzes the impact of the ruble exchange rate on Russian imports from the EU27. The theoretical model considers exporters with elastic output and incompletely free redistribution of outputs between destination markets. The model predicts that an appreciation (depreciation) of the ruble exchange rate leads to an increase (decrease) in volumes, and the adjustment degree decreases as a destination market’s share in the firm's total exports increases. The degree of prices (in euros) adjustment to exchange rate changes, on the contrary, increases as the share of a destination market increases. The empirical results based on Eurostat data for 2005-21 are consistent with these hypotheses. The extensive component of import reaction is considered separately. I show the ruble depreciation reduces the probability of new companies entering the market and increases the probability of existing suppliers exit the market. At the same time, the probability of a firm's exit increases stronger when the share of the Russian market in the firm's total output decreases.

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