Our paper studies the effect of foreign exchange derivatives on international trade in China theoretically and empirically. On one hand, we build a two-stage model of an international Cournot duopoly under exchange rate uncertainty, which extends the model of Broll et al (2009). Our extended...

This paper examines changes in the monetary policy exchange rate channel in the presence of foreign currency derivatives (FCD) markets in China. Initially a theoretical macroeconomics model incorporating the exchange rate risk hedging is presented, and this is followed by an empirical test. A...