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Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports

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  • Nicolas Berman
  • Antoine Berthou

Abstract

This paper analyzes empirically the role of financial market imperfections in the way countries' exports react to a currency depreciation. Using quarterly data for 27 developed and developing countries over the period 1990-2005, we find that the impact of a depreciation on exports will be less positive-or even negative-for a country if: (i) firms borrow in foreign currency; (ii) they are credit constrained; (iii) they are specialized in industries that require more external capital; (iv) the magnitude of depreciation or devaluation is large. This last result emphasizes the existence of a nonlinear relationship between an exchange rate depreciation and the reaction of a country's exports when financial imperfections are observed. This offers a new explanation for the consequences of recent currency crises in middle-income countries. Copyright � 2009 The Authors. Journal compilation � Blackwell Publishing Ltd 2009.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 17 (2009)
Issue (Month): 1 (02)
Pages: 103-120

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Handle: RePEc:bla:reviec:v:17:y:2009:i:1:p:103-120

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Cited by:
  1. Samba MBAYE, 2012. "Beggar-thy-Neighbor Effects of Currency Undervaluation: Is China the Tip of the Iceberg?," Working Papers 201239, CERDI.
  2. n.a.m, Naseem & abu hassan shaari mohd, Nor & tamat, Sarmidi & noor aini, khalifah, 2013. "Exports and Exchange Rate Movements: The Role of Credit Market Imperfections," MPRA Paper 52395, University Library of Munich, Germany.
  3. Berthou, Antoine, 2008. "An investigation on the effect of real exchange rate movements on OECD bilateral exports," Working Paper Series 0920, European Central Bank.

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