Exchange rate movements and export market dynamics: evidence from China

Abstract

This paper highlights the relationship between foreign exchange rate fluctuations and firms' export market dynamics using a Chinese firm-level production data and a firm-level trade data over the period of [2000][2001][2002][2003][2004][2005][2006]. This study adopts a discrete-time survival model in our empirical investigation and further executes several extensions and robustness checks to the baseline results. The main results of the paper can be summarized as follows: First, an exchange rate appreciation increases the likelihood of export market exit and decreases the probability of export market entry. Second, high productivity firms are less likely to exit from export markets and more likely to enter export markets in the period of exchange rate appreciation. Third, exchange rate appreciation decreases the likelihood of export market entering and increases the likelihood of export market exiting more for private-owned firms, young firms and non-eastern firms. Finally, other sources of heterogeneity, such as extensive margins, import demand elasticity, different destinations, U.S. dollar peg, and the liberalization of trading rights is also important to the effects of exchange rate changes. JEL F14 F31 F32 F41

Assessing Relationship Between Exchange Rate and Stock Returns: A Case of PSX

“…The research further stated that in the case of floating exchange rates, the international companies start losing their edge in the competition. However, the research of Huang (2017) stated that when the local currency depreciates then the multinational corporations operating domestically gains over the local rivals. Besides, another research stated that alterations in the exchange rate specifically when it appreciates, the exports of the country are affected along with the input costs which results in a significant influence on the local stock market (Sichoongwe, 2016).…”