The Effect of Real Exchange Rate Movements on the Life Expectancy of
Manufacturing Plants in Ireland, 1973-94
JEL Classification F41, L60
Jozef Konings and Patrick P. Walsh
Katholieke Universiteit Leuven, Deveriotstraat 34, 300 Leuven, Belgium and
Department of Economics, Trinity College, Dublin 2, Ireland.
AbstractWe estimate the factors that affect the life expectancy of
plants operating in the manufacturing sector of Ireland over the period
1980-1994. Our results suggest that real exchange rate appreciations have
caused a great number of infant mortalities in domestic plants both in the
traditional and high tech sectors over this period. Real effective exchange rate
movements are estimated to have no effect on the plant life expectancy of
foreign owned firms. Domestic plants operating in the high-tech sector are
estimated to have a higher life expectancy than those operating in the
traditional sector. In addition, the real exchange rate effect on the survival
rates of domestic plants in the R&D intensive sectors even though
significant is weaker compared with the traditional sector.
AcknowledgementsThis paper is part of a research project funded by the
Social Science Research Council of the Royal Irish Academy entitled "The Impact
of Exchange Rate Movements on Job creation and Job Destruction in Manufacturing:
A Comparative Study of Ireland and Belgium in the 1990s". This paper was
presented in seminars at the Katholieke Universiteit Leuven, Dartmouth College
and to the Irish Economic Association in April 1997. We thank Frances Ruane, Leo
Sleuwaegen, Reinhilde Veugelers for helpful comments.