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publications
Exchange Rate Pass-Through and Importers’ Credit Constraints: Evidence from China
Published in Journal of Economic Behavior and Organization, 2025
This paper examines the patterns of exchange rate pass-through (ERPT) among Chinese importers and the role played by credit constraints in shaping the ERPT. Using highly dis-aggregated firm-product-country-level transaction data from 2000 to 2007, we find that (1) the average level of ERPT into import prices in China is around 73%; (2) for importers in financially more constrained sectors, ERPT tends to be more complete; (3) a higher degree of import sourcing diversity leads to a less complete pass-through and partially offsets the effects of credit constraints. Our findings demonstrate the significance of credit constraints in governing ERPT into import prices. Furthermore, a more diversified import sourcing network can enhance the ability of importers to cope with exchange rate shocks and help alleviate the impact of financial constraints on international trade.
Recommended citation: Li, Yao Amber and Lu, Lingfei and Zhao, Tengyu. "Exchange Rate Pass-Through and Importers’ Credit Constraints: Evidence from China." Journal of Economic Behavior and Organization 236 (2025), 107044.
research
teaching
Teaching Assistant at HKUST
Teaching Assistant, HKUST Business School, Department of Economics, 2020
- ECON4364: International Trade and Investment (Fall 2021, Fall 2023, Spring 2024, Fall 2024)
- ECON4374: International Macroeconomics and Finance (Fall 2022)
- PPOL5130: Microeconomics and Public Policy (Fall 2019)
- CON6110T: China’s Financial Market and Macroeconomics (Fall 2020)
working_papers
Import-Export Linkages as a Channel for Exchange Rate Hedging
Published:
This paper shows that firms hedge exchange rate risk through their import–export linkages. Using Chinese customs micro data, I document that exchange rate shocks from import origins and export markets have opposite effects on export growth, and that these elasticities are markedly attenuated for two-way traders. Moreover, greater overlap between a firm’s supplier and destination portfolios further dampens the shock transmission. I develop a quantitative trade framework with risk aversion under mean–variance trade-off. Multilateral currency covariance and firm network shares jointly shape exposure of price competitiveness and cost channels. In an exact-hat linear system, exchange rate uncertainty creates risk-adjusted pricing premia and reallocates firms’ import shares toward currencies that offset revenue exposure. I also provide tractable counterfactual analyses on alternative trade structure and exchange rate environments.
Recommended citation: Lingfei Lu. Import-Export Linkages as a Channel for Exchange Rate Hedging; In Progress (2025).
The Spill-back and Spillover Effects of US Monetary Policy: Evidence on an International Cost Channel
Published:
We find that an unanticipated tightening of US monetary policy tends to raise US import prices. This empirical “spill-back” pattern differs from the predictions of typical open-economy macro models. We also document a new empirical “spillover” effect: import prices of other countries also rise following an unexpected US monetary tightening. To understand the mechanism, we examine Chinese exporters and identify a borrowing cost channel - their liquidity conditions generally deteriorate after a US monetary tightening. Indeed, the output price response is greater for those firms facing higher borrowing costs or tighter liquidity conditions.
Recommended citation: Yao Amber Li, Lingfei Lu, Shang-Jin Wei and Jingbo Yao. "The Spill-back and Spillover Effects of US Monetary Policy: Evidence on an International Cost Channel." NBER Working Paper Series No. w33811 (2025).