Exchange rate expectations and exports : Firm‐level evidence from China

Xiaohua BAO; Hailiang HUANG; Larry D. QIU; Xiaozhuo WANG

doi:10.1111/roie.12709

Exchange rate expectations and exports : Firm‐level evidence from China

Xiaohua BAO, Hailiang HUANG, Larry D. QIU^*, Xiaozhuo WANG

^*Corresponding author for this work

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low-productivity firms, state-owned enterprises, processing trade, and final goods trade.

Original language	English
Number of pages	27
Journal	Review of International Economics
DOIs	https://doi.org/10.1111/roie.12709
Publication status	E-pub ahead of print - 21 Sept 2023

Bibliographical note

Funding Information:
We thank the referee for very helpful comments and suggestions. We also thank Yuqing Tang for her excellent research assistance. We acknowledge the financial support from the Social Science Foundation of China (18ZDA069, 20CJY046), the Shanghai Municipal Education Commission (2019‐01‐07‐00‐07‐E00031) and Humanlity and Social Science Foudation of China (17YJA630029).

Publisher Copyright:
© 2023 John Wiley & Sons Ltd.

Keywords

exchange rate expectation
exports
RMB appreciation

Access to Document

10.1111/roie.12709

Cite this

@article{1204e62f8c1245e392d27cf41d8d037e,

title = "Exchange rate expectations and exports : Firm‐level evidence from China",

abstract = "The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low-productivity firms, state-owned enterprises, processing trade, and final goods trade.",

keywords = "exchange rate expectation, exports, RMB appreciation",

author = "Xiaohua BAO and Hailiang HUANG and QIU, {Larry D.} and Xiaozhuo WANG",

note = "Funding Information: We thank the referee for very helpful comments and suggestions. We also thank Yuqing Tang for her excellent research assistance. We acknowledge the financial support from the Social Science Foundation of China (18ZDA069, 20CJY046), the Shanghai Municipal Education Commission (2019‐01‐07‐00‐07‐E00031) and Humanlity and Social Science Foudation of China (17YJA630029). Publisher Copyright: {\textcopyright} 2023 John Wiley & Sons Ltd.",

year = "2023",

month = sep,

day = "21",

doi = "10.1111/roie.12709",

language = "English",

journal = "Review of International Economics",

issn = "0965-7576",

publisher = "Wiley-Blackwell Publishing Ltd",

}

TY - JOUR

T1 - Exchange rate expectations and exports : Firm‐level evidence from China

AU - BAO, Xiaohua

AU - HUANG, Hailiang

AU - QIU, Larry D.

AU - WANG, Xiaozhuo

N1 - Funding Information: We thank the referee for very helpful comments and suggestions. We also thank Yuqing Tang for her excellent research assistance. We acknowledge the financial support from the Social Science Foundation of China (18ZDA069, 20CJY046), the Shanghai Municipal Education Commission (2019‐01‐07‐00‐07‐E00031) and Humanlity and Social Science Foudation of China (17YJA630029). Publisher Copyright: © 2023 John Wiley & Sons Ltd.

PY - 2023/9/21

Y1 - 2023/9/21

N2 - The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low-productivity firms, state-owned enterprises, processing trade, and final goods trade.

AB - The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low-productivity firms, state-owned enterprises, processing trade, and final goods trade.

KW - exchange rate expectation

KW - exports

KW - RMB appreciation

UR - http://www.scopus.com/inward/record.url?scp=85171632457&partnerID=8YFLogxK

U2 - 10.1111/roie.12709

DO - 10.1111/roie.12709

M3 - Journal Article (refereed)

SN - 0965-7576

JO - Review of International Economics

JF - Review of International Economics

ER -

Exchange rate expectations and exports : Firm‐level evidence from China

Abstract

Bibliographical note

Keywords

Access to Document

Other files and links

Cite this