Exchange rate volatility, financial constraints and trade: empirical evidence from Chinese firms

Arbeitspapier

This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints. Our empirical analysis relies on export data for more than 100,000 Chinese exporters over the period 2000-2006. We confirm a trade-deterring effect of RER volatility. We find that the value exported by firms, as well as their probability of entering new export markets, decrease for destinations with higher exchange rate volatility and that this effect is magnified for financially vulnerable firms. As expected, financial development does seem to dampen this negative impact, especially on the intensive margin of export. These results provide microfounded evidence that financial constraints may play a key role in determining the macro impact of RER volatility on real outcomes.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: FIW Working Paper ; No. 112

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; Firm Performance: Size, Diversification, and Scope
• Subject: Exchange rate volatility ; financial development ; exports

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Héricourt, Jérôme ; Poncet, Sandra
• Event: Veröffentlichung
• (who): FIW - Research Centre International Economics
• (where): Vienna
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/121119
• Last update: 10.03.2025, 11:45 AM CET