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Exchange rate jumps and exports: Evidence from China

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  • Guangzhong Li
  • Jie Li
  • Jiaqing Zhu

Abstract

We apply the autoregressive conditional jump intensity (ARJI) model to monthly exchange rate returns of China against 81 countries and investigate the impact of exchange rate volatility on exports over the period of 1995–2004. We decompose bilateral exchange rate volatility into continuous and discrete components and find that only the discrete part of exchange rate volatility, that is, the exchange rate jumps, has a significantly negative effect on exports, which to some extent reconciles the old yet unsettled debate in previous literature on the role of exchange rate volatility in international trade. There is also some evidence suggesting that the development of domestic financial market will boost international trade, but it does not help attenuate the negative effect of bilateral exchange rate jump risk on exports.

Suggested Citation

  • Guangzhong Li & Jie Li & Jiaqing Zhu, 2018. "Exchange rate jumps and exports: Evidence from China," The World Economy, Wiley Blackwell, vol. 41(9), pages 2374-2388, September.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:9:p:2374-2388
    DOI: 10.1111/twec.12594
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    Cited by:

    1. Sensoy, Ahmet & Serdengeçti, Süleyman, 2020. "Impact of portfolio flows and heterogeneous expectations on FX jumps: Evidence from an emerging market," International Review of Financial Analysis, Elsevier, vol. 68(C).
    2. Song, Yuping & Huang, Jiefei & Zhang, Qichao & Xu, Yang, 2024. "Heterogeneity effect of positive and negative jumps on the realized volatility: Evidence from China," Economic Modelling, Elsevier, vol. 136(C).

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