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

Jérôme Héricourt and Sandra Poncet ()

The World Bank Economic Review, 2015, vol. 29, issue 3, 550-578

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.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://hdl.handle.net/10.1093/wber/lht035 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms (2015)
Working Paper: Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms (2015)
Working Paper: Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms (2015)
Working Paper: Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms (2013)
Working Paper: Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms (2013)
Working Paper: Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms (2013)
Working Paper: Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms (2013)
Working Paper: Exchange rate volatility, financial constraints, and trade: empirical evidence from Chinese firms (2013)
Working Paper: Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:wbecrv:v:29:y:2015:i:3:p:550-578.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The World Bank Economic Review is currently edited by Eric Edmonds and Nina Pavcnik

More articles in The World Bank Economic Review from World Bank Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().