Dollar Exchange Rate as a Credit Supply Factor – Evidence from Firm-Level Exports

53 Pages Posted: 12 Nov 2019

See all articles by Valentina Bruno

Valentina Bruno

American University - Department of Finance and Real Estate; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: October 14, 2019

Abstract

The dollar exchange rate affects real outcomes not only through competitiveness, but also through fluctuations in credit supply. Using detailed export data at the firm-level, we find that the dollar exchange rate affects exports and, conditional on the firms' and banks' financing structure, operates in the opposite direction to the competitiveness channel. Other things equal, firms that are more reliant on banks with higher dollar funding suffer a larger negative effect on exports following an appreciation of the dollar. The effect is particularly pronounced for firms with long production chains. We identify a financial channel of the dollar exchange rate operating through bank credit supply to the exporting firm.

Keywords: global factors, risk taking channel, non-core bank funding, working capital, global value chains

JEL Classification: F34, F42

Suggested Citation

Bruno, Valentina Giulia and Shin, Hyun Song, Dollar Exchange Rate as a Credit Supply Factor – Evidence from Firm-Level Exports (October 14, 2019). BIS Working Paper No. 819, Available at SSRN: https://ssrn.com/abstract=3485206

Valentina Giulia Bruno (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

HOME PAGE: http://www.american.edu/kogod/faculty/bruno.cfm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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