Exchange rates and the margins of trade : evidence from Chinese exporters
Document Type
Journal article
Source Publication
CESifo Economic Studies
Publication Date
12-1-2012
Volume
58
Issue
4
First Page
671
Last Page
702
Publisher
Oxford University Press
Keywords
exchange rates, pass-through, margins of trade, export participation, product churning
Abstract
This article studies how real exchange rate movements affect firm export behavior, using monthly data that cover the universe of Chinese export transactions over the period of 2000–2006. Specifically, we examine exchange rate effects on an exporter's extensive (entry, exit, and product churning) and intensive margins of exports. We find significant effects on the extensive margin. A 10% real appreciation of the renminbi is associated with a 1 percentage point decline in the probability of entry, and a 0.2 percentage point increase in the probability of exit. The effects among foreign-invested enterprises almost double for both entry and exit. Despite the seemingly large effect on the extensive margins, exchange rates alone can only explain about 4% of entries and about 1.6% of exits during the sample period. The exchange-rate elasticity of exports is estimated to be around 0.4 in the first year after the shock, with most of the adjustment taking place in the first six months. This finding of a relatively fast response to exchange rate shocks is consistent with anecdotal evidence about intense competition in the Chinese export sectors.
DOI
10.1093/cesifo/ifs006
Print ISSN
1610241X
E-ISSN
16127501
Publisher Statement
Copyright © CESifo Economic Studies
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Tang, H., & Zhang, Y. (2012). Exchange rates and the margins of trade: Evidence from Chinese exporters. CESifo Economic Studies, 58(4), 671-702. doi: 10.1093/cesifo/ifs006