Financial market imperfections and the impact of exchange rate movements on exports

Nicolas Berman () and Antoine Berthou ()

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: This paper analyses empirically the role of financial market imperfections in the way countries' exports react to a currency depreciation. Using quarterly data for 27 developed and developing countries over the period 1990-2005, we find that the impact of a depreciation on exports will be less positive - or even negative - for a country if : (i) firms borrow in foreign currency ;(ii) they are credit constrained ; (iii) they are specialized in industries that require more external capital ; (iv) the magnitude of depreciation or devaluation is large. This last result emphasizes the existence of a non-linear relationship between an exchangerate depreciation and the reaction of a country's exports when financial imperfections are observed. This offers a new explanation for the consequences of recent currency crises in middle income countries.

Keywords: International trade; exchange rate movements; balance-sheets effects; financial market imperfections. (search for similar items in EconPapers)
JEL-codes: F10 F32 F37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2006-07
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ftp://mse.univ-paris1.fr/pub/mse/cahiers2006/Bla06055.pdf (application/pdf)

Related works:
Working Paper: Financial Market Imperfections and the impact of exchange rate movements on exports (2006)
Journal Article: Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:mse:wpsorb:bla06055

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