Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports

Nicolas Berman () and Antoine Berthou

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Abstract: This paper analyzes 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 nonlinear relationship between an exchange rate 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.

Date: 2009-02
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Published in Review of International Economics, 2009, 17 (1), pp.103-120. ⟨10.1111/j.1467-9396.2008.00781.x⟩

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Related works:
Journal Article: Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports* (2009)
Working Paper: Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports (2009)
Working Paper: Financial market imperfections and the impact of exchange rate movements on exports (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00650665

DOI: 10.1111/j.1467-9396.2008.00781.x

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