Working Paper: NBER ID: w17593
Authors: Barry Eichengreen; Hui Tong
Abstract: We examine the impact of renminbi revaluation on firm valuations, considering two surprise announcements of changes in China's exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China's processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries.
Keywords: China; Exchange Rate Policy; Firm Valuations; Renminbi Appreciation
JEL Codes: F0; F3; F30; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| renminbi appreciation (F31) | positive impact on firms exporting to China (F69) |
| renminbi appreciation (F31) | little to no positive impact on firms providing inputs for China's processing exports (F69) |
| renminbi appreciation (F31) | positive impact on firms competing with China in home markets (F61) |
| renminbi appreciation (F31) | decrease in valuations for financially constrained firms (G32) |