Financial market imperfections and the impact of exchange rate movements

Nicolas Berman () and Antoine Berthou
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Nicolas Berman: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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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 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.

Keywords: financial market imperfections; balance-sheets effects; exchange rate movements; International trade; Commerce international; mouvements de taux de change; effets de bilan; imperfections financières (search for similar items in EconPapers)
Date: 2006-07
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00118834
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Citations: View citations in EconPapers (4)

Published in 2006

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Working Paper: Financial market imperfections and the impact of exchange rate movements (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00118834

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