Financial constraints, exchange rate changes and export price: Evidence from Chinese exporters

Ting Chen, Wenjie Luo and Xunyong Xiang

Finance Research Letters, 2022, vol. 48, issue C

Abstract: Focusing on firm heterogeneity and introducing financial constraints into the model of Berman et al. (2012), this paper analyses how financial constraints affect the exchange rate pass-through of exporters. Theoretically, the model shows that financially constrained firms have a higher exchange rate pass-through. Empirically, we use the Annual Survey of Industrial Firms and Chinese Customs Trade Statistics from 2000 to 2009 to examine the impact of financial constraints on the exchange rate pass-through at the micro level, and the results are consistent with theoretical expectations. This paper provides a micro-level explanation for the “lack of response of exports to exchange rate movements” phenomenon.

Keywords: Financial constraints; Exchange rate pass-through; Firm heterogeneity; Micro-level data (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001246

DOI: 10.1016/j.frl.2022.102823

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