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.


We 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.


This 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.