Exchange Rates, Borrowing Costs and Exports: Firm-Level Evidence

Kwan Yong Lee and Kanda Naknoi
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Kwan Yong Lee: University of North Dakota

No 2014-18, Working papers from University of Connecticut, Department of Economics

Abstract: This study empirically examines the effects of currency depreciation on the exporting firms' borrowing costs and exports. Using Korean data, first we find novel evidence that unanticipated currency depreciation increases the firm-level real interest rate for firms in sectors importing intermediate inputs. Next, we show that currency depreciation has contractionary effects of rising costs of borrowing and imported inputs, and an expansionary effect of an improvement in price competitiveness. The overall effect of currency depreciation on exports is found to be contractionary, and our estimation has captured the effects of large financial shocks during financial crises.

Keywords: Balance sheet effect; Exchange rate; Borrowing Costs; Exports (search for similar items in EconPapers)
JEL-codes: F14 F31 F41 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014-07
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2014-18

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