Exchange rates and exports: evidence from manufacturing firms in the UK

Zhang, Xufei (2008) Exchange rates and exports: evidence from manufacturing firms in the UK. PhD thesis, University of Nottingham.

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Abstract

The thesis examines the effect of exchange rate variability on firms' export decisions, using data for UK manufacturing firms. We separately investigate the relationship between the changes of level of exchange rate and exports and that between exchange rate uncertainty and exports. Our results show that export extensive margin is not significantly related to changes in the level of exchange rates, whereas exchange rates have a significant and negative impact on the export intensity. Since industry heterogeneity is important in the effect of exchange rate level changes, we further explore possible explanations. In particular, we test whether external orientation and market structure play a role in the effect. Our results provide significant evidence for the role of external orientation and market structure. We also find significant evidence for the hysteresis effect of exchange rate uncertainty on exports, using new measures of uncertainty. In both cases, the behaviour of multinationals is investigated. We find that multinationals are less likely to be negatively affected by both changes of level of exchange rate and exchange rate uncertainty than indigenous firms.

It contributes to the micro econometric literature in several aspects. Our evidence for industry heterogeneity from UK firm level data is new. Our explanations for industry heterogeneity by testing two hypotheses are the first attempt to investigate the factors driving different effects across industries. New measures of exchange rate uncertainty and related new method are used to test the hypothesis of hysteresis effects of uncertainty on trade. The use of micro data and new measures enable us to overcome the econometric difficulties and problems in previous studies. We also investigate whether multinationals' export behaviour is different from that of indigenous firms in response to exchange rate fluctuations. As far as we know, the multinationals' ability to deal with currency risk has never been examined before. The thesis provides new evidence for the multinationals' advantage of internalising currency risk over indigenous firms under exchange rate movements.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Greenaway, D.
Kneller, R.
Keywords: Foreign exchange rates, exports, Great Britain
Subjects: H Social sciences > HG Finance
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > School of Economics
Item ID: 28227
Depositing User: Airey, Ms Valerie
Date Deposited: 26 Jan 2015 11:28
Last Modified: 15 Sep 2016 13:01
URI: http://eprints.nottingham.ac.uk/id/eprint/28227

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