RISK, UNCERTAINTY AND CHINA'S EXPORTS *

Guangzhong Li, Jan P. Voon and Jimmy Ran

Australian Economic Papers, 2006, vol. 45, issue 2, pages 158-168

Abstract: Both theoretical and empirical models were developed in this paper to examine how exporters' response to real exchange rate volatility (RERV) and real exchange rate misalignment (RERM) varies across industries in China. The theoretical model indicates that the impact of RERV depends on exporters' attitude to risk while the effect of RERM is ambiguous. Using disaggregated industry data, Chinese exporters were found to be averse to RERV and RERM. This suggests that the negative impact on China's exports resulting from a revaluation of the RMB will be mitigated by a positive impact due to the reduction of RERM. Copyright Blackwell Publishing Ltd/University of Adelaide and Flinders University 2006..

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