Exchange Rates, Optimization of Industrial Resources Allocation Efficiency, and Environmental Pollution: Evidence from China Manufacturing

The impact of exchange-rate fluctuations on resource reallocation is particular interest to researchers and policymakers with China’s further opening the international market transformation economic growth. With high-speed growth, pollution issues have become an concern. This paper examines how RMB movements affect allocation efficiency within industries at different levels, based data Chinese industrial enterprises during 1998–2007. Unlike previous studies, we analyze within-industry productivity dispersion reacts appreciation from perspective heterogeneity across firms in their exposure foreign competition each industry. Our findings suggest that causes increase dispersion, which implies a decrease efficiency. increased higher levels more diminutive than lower levels. intended shrink for high-polluting due real appreciation. Appreciation plays positive role pollution-intensive industries.