Import Response to Exchange Rate Fluctuations: A Micro-Level Investigation

50 Pages Posted: 20 May 2015

See all articles by Yao Amber Li

Yao Amber Li

Hong Kong University of Science and Technology - School of Business and Management, Department of Economics; HKUST IEMS (Institute for Emerging Market Studies)

Juanyi (Jenny) Xu

Hong Kong University of Science & Technology (HKUST); Simon Fraser University (SFU); Hong Kong University of Science & Technology (HKUST) - Department of Economics

Chen Zhao

Hong Kong University of Science & Technology (HKUST)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2015

Abstract

This paper presents theory and evidence on firms' import responses to exchange rate fluctuations using disaggregated Chinese imports data. The paper develops a heterogeneous-firm trade model that predicts import responses at both extensive and intensive margins as well as the more profound adjustment under ordinary trade than processing trade. Next, the paper empirically investigates import responses to exchange rate fluctuations at extensive and intensive margins in both the short run and the long run, and confirms the model predictions. We also find variations among import responses under different exchange rate regimes, including fixed exchange rate, expected appreciation, and confirmed appreciation.

Keywords: exchange rate, import, extensive margin, intensive margin, processing trade, exchange rate regimes, pass-through

JEL Classification: F14, F31

Suggested Citation

Li, Yao Amber and Xu, Juanyi (Jenny) and Zhao, Chen, Import Response to Exchange Rate Fluctuations: A Micro-Level Investigation (March 1, 2015). HKUST IEMS Working Paper No. 2015-27, Available at SSRN: https://ssrn.com/abstract=2607795 or http://dx.doi.org/10.2139/ssrn.2607795

Yao Amber Li (Contact Author)

Hong Kong University of Science and Technology - School of Business and Management, Department of Economics; HKUST IEMS (Institute for Emerging Market Studies) ( email )

Department of Economics, Hong Kong U of Sci&Tech
Clear Water Bay, Kowloon, Hong Kong SAR, China
Kowloon
Hong Kong

HOME PAGE: http://yaoli.people.ust.hk/

Juanyi (Jenny) Xu

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Simon Fraser University (SFU)

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Chen Zhao

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
38
Abstract Views
926
PlumX Metrics