nep-cna New Economics Papers
on China
Issue of 2011‒11‒28
one paper chosen by
Zheng Fang
Ohio State University

  1. The External Impact of China's Exchange Rate Policy: Evidence from Firm Level Data By Barry Eichengreen; Hui Tong

  1. By: Barry Eichengreen; Hui Tong
    Abstract: We examine the impact of renminbi revaluation on firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China’s processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries.
    JEL: F0 F3 F30 F31
    Date: 2011–11

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