Journal
FINANCE RESEARCH LETTERS
Volume 48, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2022.102823
Keywords
Financial constraints; Exchange rate pass-through; Firm heterogeneity; Micro-level data
Categories
Funding
- National Natural Science Foundation of China [71803060]
- Guangdong Planning Office of Philosophy and Social Science [GD20YLJ01]
- Natural Science Foundation of Guangdong Province [2018A030310620]
- Fundamental Research Funds for the Central Universities [19JNKY07]
- Guangzhou Philosophy and Social Science Foundation [2020GZQN34]
- Research Center on Economic Development in Guangdong-Hong Kong-Macao Greater Bay Area
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This paper analyzes the impact of financial constraints on the exchange rate pass-through of exporters. The results show that financially constrained firms have a higher exchange rate pass-through, providing a micro-level explanation for the lack of response of exports to exchange rate movements.
Focusing on firm heterogeneity and introducing financial constraints into the model of Berman et al. (2012), this paper analyses how financial constraints affect the exchange rate pass through of exporters. Theoretically, the model shows that financially constrained firms have a higher exchange rate pass-through. Empirically, we use the Annual Survey of Industrial Firms and Chinese Customs Trade Statistics from 2000 to 2009 to examine the impact of financial constraints on the exchange rate pass-through at the micro level, and the results are consistent with theoretical expectations. This paper provides a micro-level explanation for the lack of response of exports to exchange rate movementsphenomenon.
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