Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms
This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints. The empirical analysis relies on export data for more than 100,0...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/10/18347947/exchange-rate-volatility-financial-constraints-trade-empirical-evidence-chinese-firms http://hdl.handle.net/10986/16855 |
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okr-10986-16855 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADJUSTMENT COSTS AMERICAN ECONOMIC REVIEW BANKING CRISES BARRIER BENCHMARK SPECIFICATION BILATERAL EXCHANGE RATE BILATERAL TRADE BOND BUDGET CONSTRAINT BUSINESS CYCLES CAPACITY BUILDING CASH FLOWS CENTRAL BANK CHINESE YUAN COLLATERAL COMMODITY COMMODITY PRICES COMMON CURRENCIES CONSUMER PRICE CONVERTIBILITY COUNTRY FIXED EFFECTS COVARIANCE MATRIX CREDIT CEILING CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKETS CREDIT RATIONING CURRENCY CURRENCY APPRECIATION CURRENCY CRISES CURRENCY DEPRECIATIONS CURRENCY UNION DEBT DEPENDENT VARIABLE DEPOSITS DEPRECIATING EXCHANGE RATE DEPRECIATIONS DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIVERSIFIED FIRMS DUMMY VARIABLE EARNINGS ECONOMIC DEVELOPMENTS ECONOMIC FLUCTUATIONS ECONOMIC INSTABILITY ECONOMIC PERFORMANCE ECONOMIC POLICY EFFECT OF VOLATILITY EMERGING MARKETS EURO EXCHANGE MARKET EXCHANGE RATE EXCHANGE RATE APPRECIATION EXCHANGE RATE CHANGES EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE LEVEL EXCHANGE RATE MOVEMENTS EXCHANGE RATE POLICY EXCHANGE RATE REGIME EXCHANGE RATE RISK EXCHANGE RATE SYSTEM EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXCHANGE-RATE EXPANSION OF EXPORTS EXPLANATORY VARIABLES EXPORT CAPACITY EXPORT GOODS EXPORT MARKET EXPORT MARKETS EXPORT PERFORMANCE EXPORT SHARE EXPORTER EXPORTERS EXPOSURE EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DEVELOPMENT FINANCIAL FACTORS FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STUDIES FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL VULNERABILITY FIRM PERFORMANCE FIXED ASSETS FIXED PEG FIXED PEGS FLOATING REGIME FOREIGN CURRENCY FOREIGN DEMAND FOREIGN DIRECT INVESTMENT FOREIGN INCOME FORWARD EXCHANGE HIGHER VOLATILITY HOLDING IMPACT OF VOLATILITY IMPORT PRICE IMPORTS INCOME INCOME VOLATILITY INDUSTRIAL COUNTRIES INTANGIBLE INTANGIBLE ASSETS INTERACTION TERM INTERNAL FINANCE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MONETARY FUND INTERNATIONAL TRADE INVESTMENT DYNAMICS INVESTMENT EXPENDITURES LIABILITY LIBERALIZATION LINK BETWEEN VOLATILITY LIQUIDITY LIQUIDITY CONSTRAINTS LOCAL CURRENCY LOCAL ECONOMY LONG-TERM INVESTMENT MACROECONOMIC VARIABLES MACROECONOMICS MARKET CONDITIONS MARKET SIZE MEASURE OF VOLATILITY MICRO DATA MISALIGNMENT MONETARY ECONOMICS MONETARY POLICY NEW MARKETS NOMINAL EXCHANGE RATE NOMINAL EXCHANGE RATES NONLINEAR EFFECTS OPEN ECONOMIES OTHER CURRENCIES OUTPUT OWNERSHIP STRUCTURE POSITIVE COEFFICIENT PRICE INDEX PRICE VOLATILITY PRIVATE INVESTMENT RATE OF INVESTMENT RATIONING REAL DEPRECIATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL EXCHANGE RATES REVIEW OF ECONOMICS ROBUSTNESS CHECK ROBUSTNESS CHECKS SHARE OF CAPITAL STANDARD DEVIATION STANDARD DEVIATIONS STANDARD ERRORS SUPPLY OF CREDIT TOTAL CREDIT TOTAL EXPORT TOTAL IMPORT TOTAL IMPORTS TRADE DATA TRADE LIBERALIZATION TRADE PERFORMANCE TRADING UNCERTAINTY VARIABLE COSTS VOLATILE EXCHANGE RATES VOLATILITY WEIGHTS WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
ADJUSTMENT COSTS AMERICAN ECONOMIC REVIEW BANKING CRISES BARRIER BENCHMARK SPECIFICATION BILATERAL EXCHANGE RATE BILATERAL TRADE BOND BUDGET CONSTRAINT BUSINESS CYCLES CAPACITY BUILDING CASH FLOWS CENTRAL BANK CHINESE YUAN COLLATERAL COMMODITY COMMODITY PRICES COMMON CURRENCIES CONSUMER PRICE CONVERTIBILITY COUNTRY FIXED EFFECTS COVARIANCE MATRIX CREDIT CEILING CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKETS CREDIT RATIONING CURRENCY CURRENCY APPRECIATION CURRENCY CRISES CURRENCY DEPRECIATIONS CURRENCY UNION DEBT DEPENDENT VARIABLE DEPOSITS DEPRECIATING EXCHANGE RATE DEPRECIATIONS DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIVERSIFIED FIRMS DUMMY VARIABLE EARNINGS ECONOMIC DEVELOPMENTS ECONOMIC FLUCTUATIONS ECONOMIC INSTABILITY ECONOMIC PERFORMANCE ECONOMIC POLICY EFFECT OF VOLATILITY EMERGING MARKETS EURO EXCHANGE MARKET EXCHANGE RATE EXCHANGE RATE APPRECIATION EXCHANGE RATE CHANGES EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE LEVEL EXCHANGE RATE MOVEMENTS EXCHANGE RATE POLICY EXCHANGE RATE REGIME EXCHANGE RATE RISK EXCHANGE RATE SYSTEM EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXCHANGE-RATE EXPANSION OF EXPORTS EXPLANATORY VARIABLES EXPORT CAPACITY EXPORT GOODS EXPORT MARKET EXPORT MARKETS EXPORT PERFORMANCE EXPORT SHARE EXPORTER EXPORTERS EXPOSURE EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DEVELOPMENT FINANCIAL FACTORS FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STUDIES FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL VULNERABILITY FIRM PERFORMANCE FIXED ASSETS FIXED PEG FIXED PEGS FLOATING REGIME FOREIGN CURRENCY FOREIGN DEMAND FOREIGN DIRECT INVESTMENT FOREIGN INCOME FORWARD EXCHANGE HIGHER VOLATILITY HOLDING IMPACT OF VOLATILITY IMPORT PRICE IMPORTS INCOME INCOME VOLATILITY INDUSTRIAL COUNTRIES INTANGIBLE INTANGIBLE ASSETS INTERACTION TERM INTERNAL FINANCE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MONETARY FUND INTERNATIONAL TRADE INVESTMENT DYNAMICS INVESTMENT EXPENDITURES LIABILITY LIBERALIZATION LINK BETWEEN VOLATILITY LIQUIDITY LIQUIDITY CONSTRAINTS LOCAL CURRENCY LOCAL ECONOMY LONG-TERM INVESTMENT MACROECONOMIC VARIABLES MACROECONOMICS MARKET CONDITIONS MARKET SIZE MEASURE OF VOLATILITY MICRO DATA MISALIGNMENT MONETARY ECONOMICS MONETARY POLICY NEW MARKETS NOMINAL EXCHANGE RATE NOMINAL EXCHANGE RATES NONLINEAR EFFECTS OPEN ECONOMIES OTHER CURRENCIES OUTPUT OWNERSHIP STRUCTURE POSITIVE COEFFICIENT PRICE INDEX PRICE VOLATILITY PRIVATE INVESTMENT RATE OF INVESTMENT RATIONING REAL DEPRECIATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL EXCHANGE RATES REVIEW OF ECONOMICS ROBUSTNESS CHECK ROBUSTNESS CHECKS SHARE OF CAPITAL STANDARD DEVIATION STANDARD DEVIATIONS STANDARD ERRORS SUPPLY OF CREDIT TOTAL CREDIT TOTAL EXPORT TOTAL IMPORT TOTAL IMPORTS TRADE DATA TRADE LIBERALIZATION TRADE PERFORMANCE TRADING UNCERTAINTY VARIABLE COSTS VOLATILE EXCHANGE RATES VOLATILITY WEIGHTS WORLD DEVELOPMENT INDICATORS Heericourt, Jerome Poncet, Sandra Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| geographic_facet |
East Asia and Pacific China |
| relation |
Policy Research Working Paper;No. 6638 |
| description |
This paper studies how firm-level export
performance is affected by Real Exchange Rate (RER)
volatility and investigates whether this effect depends on
existing financial constraints. The empirical analysis
relies on export data for more than 100,000 Chinese
exporters over the 2000-6 period. The results confirm a
trade-deterring effect of RER volatility. Firms'
decision to begin exporting and the exported value decrease
for destinations with higher exchange rate volatility;
besides, this effect is magnified for financially vulnerable
firms. As expected, financial development seems to dampen
this negative impact, especially on the intensive margin of
export. These results provide micro-founded evidence
suggesting that the existence of well-developed financial
markets allows firms to hedge exchange rate risk. The
results also support a key role of financial constraints in
determining the macro impact of RER volatility on real outcomes. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Heericourt, Jerome Poncet, Sandra |
| author_facet |
Heericourt, Jerome Poncet, Sandra |
| author_sort |
Heericourt, Jerome |
| title |
Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| title_short |
Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| title_full |
Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| title_fullStr |
Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| title_full_unstemmed |
Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms |
| title_sort |
exchange rate volatility, financial constraints, and trade : empirical evidence from chinese firms |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2013/10/18347947/exchange-rate-volatility-financial-constraints-trade-empirical-evidence-chinese-firms http://hdl.handle.net/10986/16855 |
| _version_ |
1764434708653932544 |
| spelling |
okr-10986-168552021-04-23T14:03:32Z Exchange Rate Volatility, Financial Constraints, and Trade : Empirical Evidence from Chinese Firms Heericourt, Jerome Poncet, Sandra ADJUSTMENT COSTS AMERICAN ECONOMIC REVIEW BANKING CRISES BARRIER BENCHMARK SPECIFICATION BILATERAL EXCHANGE RATE BILATERAL TRADE BOND BUDGET CONSTRAINT BUSINESS CYCLES CAPACITY BUILDING CASH FLOWS CENTRAL BANK CHINESE YUAN COLLATERAL COMMODITY COMMODITY PRICES COMMON CURRENCIES CONSUMER PRICE CONVERTIBILITY COUNTRY FIXED EFFECTS COVARIANCE MATRIX CREDIT CEILING CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKETS CREDIT RATIONING CURRENCY CURRENCY APPRECIATION CURRENCY CRISES CURRENCY DEPRECIATIONS CURRENCY UNION DEBT DEPENDENT VARIABLE DEPOSITS DEPRECIATING EXCHANGE RATE DEPRECIATIONS DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIVERSIFIED FIRMS DUMMY VARIABLE EARNINGS ECONOMIC DEVELOPMENTS ECONOMIC FLUCTUATIONS ECONOMIC INSTABILITY ECONOMIC PERFORMANCE ECONOMIC POLICY EFFECT OF VOLATILITY EMERGING MARKETS EURO EXCHANGE MARKET EXCHANGE RATE EXCHANGE RATE APPRECIATION EXCHANGE RATE CHANGES EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE LEVEL EXCHANGE RATE MOVEMENTS EXCHANGE RATE POLICY EXCHANGE RATE REGIME EXCHANGE RATE RISK EXCHANGE RATE SYSTEM EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXCHANGE-RATE EXPANSION OF EXPORTS EXPLANATORY VARIABLES EXPORT CAPACITY EXPORT GOODS EXPORT MARKET EXPORT MARKETS EXPORT PERFORMANCE EXPORT SHARE EXPORTER EXPORTERS EXPOSURE EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DEVELOPMENT FINANCIAL FACTORS FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STUDIES FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL VULNERABILITY FIRM PERFORMANCE FIXED ASSETS FIXED PEG FIXED PEGS FLOATING REGIME FOREIGN CURRENCY FOREIGN DEMAND FOREIGN DIRECT INVESTMENT FOREIGN INCOME FORWARD EXCHANGE HIGHER VOLATILITY HOLDING IMPACT OF VOLATILITY IMPORT PRICE IMPORTS INCOME INCOME VOLATILITY INDUSTRIAL COUNTRIES INTANGIBLE INTANGIBLE ASSETS INTERACTION TERM INTERNAL FINANCE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MONETARY FUND INTERNATIONAL TRADE INVESTMENT DYNAMICS INVESTMENT EXPENDITURES LIABILITY LIBERALIZATION LINK BETWEEN VOLATILITY LIQUIDITY LIQUIDITY CONSTRAINTS LOCAL CURRENCY LOCAL ECONOMY LONG-TERM INVESTMENT MACROECONOMIC VARIABLES MACROECONOMICS MARKET CONDITIONS MARKET SIZE MEASURE OF VOLATILITY MICRO DATA MISALIGNMENT MONETARY ECONOMICS MONETARY POLICY NEW MARKETS NOMINAL EXCHANGE RATE NOMINAL EXCHANGE RATES NONLINEAR EFFECTS OPEN ECONOMIES OTHER CURRENCIES OUTPUT OWNERSHIP STRUCTURE POSITIVE COEFFICIENT PRICE INDEX PRICE VOLATILITY PRIVATE INVESTMENT RATE OF INVESTMENT RATIONING REAL DEPRECIATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL EXCHANGE RATES REVIEW OF ECONOMICS ROBUSTNESS CHECK ROBUSTNESS CHECKS SHARE OF CAPITAL STANDARD DEVIATION STANDARD DEVIATIONS STANDARD ERRORS SUPPLY OF CREDIT TOTAL CREDIT TOTAL EXPORT TOTAL IMPORT TOTAL IMPORTS TRADE DATA TRADE LIBERALIZATION TRADE PERFORMANCE TRADING UNCERTAINTY VARIABLE COSTS VOLATILE EXCHANGE RATES VOLATILITY WEIGHTS WORLD DEVELOPMENT INDICATORS This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints. The empirical analysis relies on export data for more than 100,000 Chinese exporters over the 2000-6 period. The results confirm a trade-deterring effect of RER volatility. Firms' decision to begin exporting and the exported value decrease for destinations with higher exchange rate volatility; besides, this effect is magnified for financially vulnerable firms. As expected, financial development seems to dampen this negative impact, especially on the intensive margin of export. These results provide micro-founded evidence suggesting that the existence of well-developed financial markets allows firms to hedge exchange rate risk. The results also support a key role of financial constraints in determining the macro impact of RER volatility on real outcomes. 2014-02-04T16:31:39Z 2014-02-04T16:31:39Z 2013-10 http://documents.worldbank.org/curated/en/2013/10/18347947/exchange-rate-volatility-financial-constraints-trade-empirical-evidence-chinese-firms http://hdl.handle.net/10986/16855 English en_US Policy Research Working Paper;No. 6638 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific China |