Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms

Jérôme Héricourt · Sandra Poncet

115 citations0/0 files storedThe World Bank Economic Review

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Global trade and economics International Business and FDI Global Financial Crisis and Policies

Abstract

In this paper, we study how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigate whether this effect depends on existing financial constraints. Our empirical analysis relies on export data for more than 100,000 Chinese exporters over the 2000–6 period. We confirm a trade-deterring effect of RER volatility. We find that firms' decision to begin exporting and the exported value decrease for destinations with a higher exchange rate volatility and that this effect is magnified for financially vulnerable firms. As expected, financial development seems to dampen this negative impact, especially on the intensive margin of export. These results provide micro-founded evidence suggesting that the existence of well-developed financial markets allows firms to hedge exchange rate risk. The results also support a key role of financial constraints in determining the macro impact of RER volatility on real outcomes.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 115 citations exist upstream.

References

1981Credit Rationing in Markets with Imperfect Information 1996Financial Dependence and Growth 2001Discrete Choice Methods with Simulation 1997Postwar U.S. Business Cycles: An Empirical Investigation 2003Discrete Choice Methods with Simulation 1990An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Units 1990Irreversibility, Uncertainty, and Investment 2000One money, one market: the effect of common currencies on trade

Cited by

2014Firms and Credit Constraints along the Global Value Chain: Processing Trade in China 2018Exchange rate volatility and trade: The role of credit constraints 2017Impact of European food safety border inspections on agri-food exports: Evidence from Chinese firms 2018Exchange Rate Effects on International Commercial Trade Competitiveness 2013Trend shocks and economic development 2019Financial frictions and export dynamics in large devaluations

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.