The External Impact of China's Exchange Rate Policy: Evidence from Firm Level Data

43 Pages Posted: 21 Nov 2011

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Hui Tong

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2011

Abstract

We examine the impact of renminbi revaluation on firm valuations, considering two surprise announcements of changes in China's exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China's processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries.

Suggested Citation

Eichengreen, Barry and Tong, Hui, The External Impact of China's Exchange Rate Policy: Evidence from Firm Level Data (November 2011). NBER Working Paper No. w17593. Available at SSRN: https://ssrn.com/abstract=1962487

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Hui Tong

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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