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

Author

Listed:
  • Xiaohua Bao
  • Hailiang Huang
  • Larry D Qiu
  • Xiaozhuo Wang

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.

Suggested Citation

  • Xiaohua Bao & Hailiang Huang & Larry D Qiu & Xiaozhuo Wang, 2022. "Exchange rate expectations and exports: Firm-level evidence from China," Discussion Papers 2022-07, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:2022-07
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    References listed on IDEAS

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    Keywords

    Exchange rate expectation; Exports; RMB appreciation;
    All these keywords.

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