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Exchange Rate Movements and Exporter Profitability

In: Exchange Rate, Credit Constraints and China’s International Trade

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  • Miaojie Yu

    (Peking University)

Abstract

This chapter examines how RMB appreciation affects profitabilities of exporting firms. Based on highly disaggregated firm-level data from 2001 to 2007, we take RMB appreciation during 2005–2007 as a natural experiment and adopt a difference-in-difference method for exporters and non-exporters. Compared to those of non-exporters, returns on equity in exporting firms dropped by about 5% after RMB appreciation. The more dependence firms have on exporting, the more declines there are in their profitabilities. RMB appreciation raised the relative price of Chinese products, which in turn decreased the capacities of exporters to generate sales.

Suggested Citation

  • Miaojie Yu, 2021. "Exchange Rate Movements and Exporter Profitability," Springer Books, in: Exchange Rate, Credit Constraints and China’s International Trade, chapter 0, pages 137-161, Springer.
    • Handle: RePEc:spr:sprchp:978-981-15-7522-8_5
    DOI: 10.1007/978-981-15-7522-8_5
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