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

18 Pages Posted: 27 Apr 2009

See all articles by Nicolas Berman

Nicolas Berman

Graduate Institute of International and Development Studies (IHEID)

Antoine Berthou

Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques; Paris School of Economics (PSE)

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.

Suggested Citation

Berman, Nicolas and Berthou, Antoine, Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports. Review of International Economics, Vol. 17, Issue 1, pp. 103-120, February 2009, Available at SSRN: https://ssrn.com/abstract=1395445 or http://dx.doi.org/10.1111/j.1467-9396.2008.00781.x

Nicolas Berman (Contact Author)

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Antoine Berthou

Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques ( email )

106/112 boulevard de l'Hopital
Paris Cedex 13, 75647
France
(+33)144078211 (Phone)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2
Abstract Views
457
PlumX Metrics