Renminbi Rising? Exporters' Response to China's Currency Internationalization

Sonali Chowdhry

No 2085, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper investigates the heterogeneous responses of exporters to policy reforms undertaken by the People’s Bank of China to internationalize the Renminbi (RMB). Using detailed customs data from France for the initial years of these reforms (2011-2017), it documents several novel stylized facts on RMB adoption, highlighting both the growth and extreme skewness in RMB’s uptake across firms and varieties. It further examines various mechanisms underpinning self-selection into RMB and proposes a novel channel that strongly predicts RMB adoption. This channel exploits information on firms’ invoicing currency strategies in existing markets and is observed to be a valid instrument for RMB adoption. Leveraging this new instrument, the paper shows that invoicing in RMB significantly boosted exports for varieties sold to China. Overall, the findings suggest that early RMB adoption, although limited across firms, provided an important competitive edge when exporting to China.

Keywords: Firm heterogeneity; invoicing currency; trade transactions; China (search for similar items in EconPapers)
JEL-codes: F14 F23 (search for similar items in EconPapers)
Pages: 33 p.
Date: 2024
New Economics Papers: this item is included in nep-cna, nep-int and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.903651.de/dp2085.pdf (application/pdf)

Related works:
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:diw:diwwpp:dp2085

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().