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【Yaqi WANG, Xiaofen TAN】RMB Exchange Rate, Trade Mode and Product Quality

Published:2018-04-20  Views:

The paper “RMB Exchange Rate, Trade Mode and Product Quality”, written by Associate Professor Yaqi WANG, Professor Xiaofen TAN of the School of Finance, postgraduate Jinhui ZHANG and doctoral student Bing LU of Tsinghua University, was published in the third issue of “Journal of Financial Research” in 2018. Jinhui ZHANG is an undergraduate of cohort 2013 in the School of Finance and a trainee of the 4th distinguished academic talents training project. Bing LU is an undergraduate of cohort 2012 in the School of Finance and also a trainee of the 3rd distinguished academic talents training project.

Abstract: Based on the firm-level data and custom's transaction level data from 2000 to 2006, this paper investigates the impact of RMB real effective exchange rate movement on product quality of Chinese manufacturing enterprises. We find that the appreciation of RMB exchange rate will improve the average product quality. Quality improvement is significant for non-processing exporters but not for processing exporters.Besides, by dividing exporters into three categories-incumbents, entrants and dropouts, we find that the group of incumbents is the major contributor to the quality improvement. And we also note that firm's entry and exit play an important role in quality improvement. Finally, we find that against the backdrop of RMB exchange rate appreciation,the probability of market exit of products with lower quality is higher than that of products with higher quality. This effect is significant for non-processing exporters but not for processing exporters.

Keywords: RMB Real Effective Exchange Rate; Product Quality; Trade Mode; Quality Decomposition



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