Can Financial Marketization Mitigate the Negative Effect of Exchange Rate Fluctuations on Exports? Evidence from Chinese Regions

11 Pages Posted: 1 Oct 2019

See all articles by Brian M. Lucey

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Jiangxi University of Finance and Economics; Abu Dhabi University - College of Business Administration; Ho Chi Minh City University of Economics and Finance

Xiaoxue Wang

Tianjin University of Finance & Economics

Yanfang Wang

Tianjin University of Finance & Economics

Ying Xu

Tianjin University of Finance & Economics

Date Written: September 20, 2019

Abstract

A lot of research has been undertaken on the relationship between exchange rate fluctuation and export. On this basis, this paper considers the moderating effect of financial marketization on the relationship between them, and shifts the research perspective to the provincial level. Using quarterly inter-provincial panel data from 2006 to 2017, this paper focuses on whether financial marketization can weaken the negative effect of exchange rate volatility on export. The conclusions are as follows: at the national level, the depreciation of the inter provincial effective exchange rate in the current period can promote export growth in the next period, while exchange rate volatility will inhibit the next period exports. Financial marketization can mitigate the negative effect of exchange rate volatility on exports. We do however find regional differences in the intensity of these relationships. This study provides empirical evidence for accelerating the reform of financial marketization, steadily promoting the formation mechanism of RMB exchange rate and balancing the development of regional trade.

Keywords: Inter Provincial Effective Exchange Rate; Export Trade; Financial Marketization

JEL Classification: F832.6; F746.12

Suggested Citation

Lucey, Brian M. and Wang, Xiaoxue and Wang, Yanfang and Xu, Ying, Can Financial Marketization Mitigate the Negative Effect of Exchange Rate Fluctuations on Exports? Evidence from Chinese Regions (September 20, 2019). Available at SSRN: https://ssrn.com/abstract=3457317 or http://dx.doi.org/10.2139/ssrn.3457317

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
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+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Jiangxi University of Finance and Economics ( email )

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China

Abu Dhabi University - College of Business Administration ( email )

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Xiaoxue Wang

Tianjin University of Finance & Economics

25 Zhujiang RD, Hexi District
Tianjin, Tianjin 300222
China

Yanfang Wang

Tianjin University of Finance & Economics

25 Zhujiang RD, Hexi District
Tianjin, Tianjin 300222
China

Ying Xu

Tianjin University of Finance & Economics

25 Zhujiang RD, Hexi District
Tianjin, Tianjin 300222
China

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