CEPII, Recherche et Expertise sur l'economie mondiale
Exchange Rate Volatility, Financial Constraints and Trade: Empirical Evidence from Chinese Firms

Jérôme Héricourt
Sandra Poncet

 Highlights :

 Abstract :
This paper studies how firm-level export performance is affected by RER volatility and investigates whether this effect depends on existing financial constraints. Our empirical analysis relies on export data for more than 100,000 Chinese exporters over the period 2000-2006. We confirm a trade-deterring effect of RER volatility. We find that firms tend to export less and fewer products to destinations with higher exchange rate volatility and that this effect is magnified for financially vulnerable firms. As expected, financial development does seem to dampen this negative impact, especially on the intensive margin of export.

 Keywords : Exchange rate volatility | financial development | exports

 JEL : F10, R12, L25
CEPII Working Paper
N°2012-35, December 2012

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Emerging Countries