Exchange Rate Jumps and Exports: Evidence from China

15 Pages Posted: 17 Sep 2018

See all articles by Guangzhong Li

Guangzhong Li

Sun Yat-Sen Business School, Sun Yat-Sen University

Jie Li

Jinan University - Institute of Industrial Economics

Jiaqing Zhu

Guangdong University of Foreign Studies

Date Written: September 2018

Abstract

We apply the autoregressive conditional jump intensity (ARJI) model to monthly exchange rate returns of China against 81 countries and investigate the impact of exchange rate volatility on exports over the period of 1995–2004. We decompose bilateral exchange rate volatility into continuous and discrete components and find that only the discrete part of exchange rate volatility, that is, the exchange rate jumps, has a significantly negative effect on exports, which to some extent reconciles the old yet unsettled debate in previous literature on the role of exchange rate volatility in international trade. There is also some evidence suggesting that the development of domestic financial market will boost international trade, but it does not help attenuate the negative effect of bilateral exchange rate jump risk on exports.

Keywords: exchange rate volatility, jump intensity, trade

Suggested Citation

Li, Guangzhong and Li, Jie and Zhu, Jiaqing, Exchange Rate Jumps and Exports: Evidence from China (September 2018). The World Economy, Vol. 41, Issue 9, pp. 2374-2388, 2018. Available at SSRN: https://ssrn.com/abstract=3245474 or http://dx.doi.org/10.1111/twec.12594

Guangzhong Li (Contact Author)

Sun Yat-Sen Business School, Sun Yat-Sen University ( email )

135 Xingang Xi Road
Guangzhou, Guangdong 510275
China

Jie Li

Jinan University - Institute of Industrial Economics

Guangdong
China

Jiaqing Zhu

Guangdong University of Foreign Studies ( email )

Collaborative Innovation Center for Silk Road
Guangzhou, Guangdong
China

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