Exchange rate expectations and exports: Firm-level evidence from China

Xiaohua Bao, Hailiang Huang, Larry Qiu and Xiaozhuo Wang

No 2022-07, Discussion Papers from University of Nottingham, GEP

Abstract: The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low-productivity firms, state-owned enterprises, processing trade, and final goods trade.

Keywords: Exchange rate expectation; Exports; RMB appreciation (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-big, nep-cna, nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:2022-07

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