This paper examines the impact of currency appreciation and firm heterogeneity on exports from ASEAN, which appears to have the potential to replicate China's export-driven growth miracle. It tries to fill the gap in literature related to exchange rate fluctuations and firm heterogeneity in Southeast Asia, specifically focusing on the “zero-trade” problem. Four main findings emerge from this study. First, contrary to conventional wisdom, exchange rate appreciation does, in fact, discourage exports by ASEAN-based companies. Second, firm responses to currency appreciation vary significantly. While SMEs and first-time exporters are more sensitive to exchange rate movements, other exporters can mitigate these risks through foreign and domestic affiliations (although foreign ownership proves to be more helpful). Third, firms whose exports consist of foreign inputs are less affected by local currency appreciation. And fourth, companies in the services sector are more sensitive to currency appreciation than those in manufacturing.
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