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on International Finance |
| By: | Cheung, Yin-Wong; Sengupta, Rajeswari |
| Abstract: | We explore the real effective exchange rate (REER) effects on the share of exports of Indian non-financial sector firms for the period 2000 to 2010. Our empirical analysis reveals that, on average, there has been a strong and significant negative impact of currency appreciation as well as currency volatility on Indian firms’ export shares. While the firm-level accounting information and other macro variables have limited implications, there is evidence that these Indian firms respond asymmetrically to exchange rates. For instance, the REER change effect is likely to be driven by a negative appreciation effect but not so much a depreciation effect. Also, the Indian firms that have smaller export shares tend to have a stronger response to both REER change and volatility. Compared with those exporting goods, the firms that export services are more affected by exchange rate fluctuations. The findings, especially those on asymmetric responses, have important policy implications. |
| Keywords: | F1; F4 |
| JEL: | F4 F2 F1 |
| Date: | 2012–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43118&r=ifn |
| By: | Samba Mbaye (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I) |
| Abstract: | This paper examines empirically one of the most popular views in international economics, yet barely tested: undervaluation of the currency is a "beggar-thy-neighbor" policy. It assesses simultaneously the two closely related implications of the beggar-thy-neighbor view: (i) undervaluation of the domestic currency improves the domestic trade balance; and most importantly, (ii) undervaluation of the domestic currency negatively impacts the other countries' trade balances. Starting from the traditional imperfect substitutes model, we propose an empirical framework allowing the estimation of both the internal and external impacts of currency undervaluation. This framework is then applied to a panel of 62 advanced and emerging markets over the period 1990-2007. The results give strong support to the beggar-thy-neighbor hypothesis. We find that currency undervaluation is robustly and significantly associated with an improvement of the domestic trade balance. We also find that countries that keep their currencies undervalued tend to negatively impact the other countries' trade balances. Finally, our estimates suggest that the external effect of China's renminbi, which has been the focus of the profession thus far, might be "the tip of the iceberg": the latter two results carry over when China's trade data are excluded from the analysis. |
| Keywords: | exchange rate misalignment;Trade;Undervaluation;beggar-thy-neighbor;China |
| Date: | 2012–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00761380&r=ifn |
| By: | Alan M. Taylor |
| Abstract: | In broad perspective, there have been essentially two competing views of the global financial crisis, albeit there are some complementarities among them. One view looks across the border: it mainly blames external imbalances, the large-scale mix of unprecedented pattern current account deficits and surpluses which entailed massive and growing net and gross international financial flows in the last decade. The alternative view looks within the border: it finds more fault in the domestic arena of the afflicted countries, attributing the problems to financial systems where risks originated in excessive credit booms in local banks. This paper uses the lens of macroeconomic and financial history to confront these dueling hypotheses with evidence. Of the two, the credit boom explanation stands out as the most plausible predictor of financial crises since the dawn of modern finance capitalism in the late nineteenth century. Historically, we find that global imbalances are not as important as a factor in financial crises as is often perceived, and they have much less correlation with subsequent episodes of financial distress compared to direct indicators like credit drawn from the financial system itself. |
| JEL: | E3 E4 E5 F3 F4 N1 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18606&r=ifn |
| By: | Jérôme Héricourt; Sandra Poncet |
| 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 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2012-35&r=ifn |
| By: | Tomás Castagnino (Central Bank of Argentina); Laura D´Amato (Central Bank of Argentina); Máximo Sangiácomo (Central Bank of Argentina) |
| Abstract: | This paper delves into the importance of access to financing for the performance of firms in export markets. Based on a unique microeconomic database that combines data on Argentine firms´ characteristics and export performance with information on their domestic and external financing, we provide a rich insight into their financing patterns. Through the use of a descriptive and econometric analysis, we find that: i) having more access to bank credit facilitates firms´ entry into export markets, ii) once they become exporters, it is the access to foreign financing what seems to matters for their success in foreign markets. Also, to study the duration of firms in export markets, we estimate survival functions by firm size, using the Kalpan-Meier estimator. We find that the probability of firms´survival in export markets increases with their size in the earlier years of exporting. Once firms become regular exporters, their permanece in export markets seems to less dependent on their size. |
| Keywords: | credit constraints, bank credit, international trade |
| JEL: | F10 F13 G20 G28 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:bcr:wpaper:201258&r=ifn |