Firm-Level Exchange Rate Exposure in the Eurozone
International Business Review, Vol. 19, No. 5, pp. 468-478, 2010
28 Pages Posted: 18 Jan 2009 Last revised: 12 Aug 2011
Date Written: February 17, 2009
Using a sample of 1,154 European firms from 11 countries, we show that firm-level exchange exposure for Eurozone and non-Eurozone European firms has increased since the introduction of the euro, but this rise was smaller for Eurozone than non-Eurozone firms. This increase in firm-specific exposure was offset by a substantial reduction in market-level exchange exposure in most Eurozone countries, so the advent of the euro appears to have been associated with a shift in exchange risk from systematic to firm-specific. We also find that post-euro, Eurozone firms' exchange exposure is significantly greater than that of non-Eurozone European firms. This difference, however, disappears after controlling for several country-specific and firm-specific characteristics that potentially influence firms' exchange exposure.
Keywords: foreign exchange exposure, competitive exchange exposure, Eurozone, economic openness
JEL Classification: F30, G10
Suggested Citation: Suggested Citation