Trade and Exposure

11 Pages Posted: 8 Jan 2008 Last revised: 21 Oct 2010

See all articles by Kathryn M.E. Dominguez

Kathryn M.E. Dominguez

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER)

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 2001

Abstract

Are firms that engage in trade more vulnerable to exchange rate risk? Or, put another way, that exchange rate movements will influence firm asset value through the trade channel. In this paper we examine the relationship between exchange rate movements, firm value and trade. Our empirical work tests whether exchange rate exposure can be explained by variables that proxy for the level of international activity, firm size, industry affiliation and country affiliation. The results suggest that while a significant fraction of firms in these countries is exposed to exchange rate movements, there is little evidence of a systematic link between exposure and trade. Indeed, what little evidence there is of a link suggests that firms that engage in greater trade exhibit lower degrees of exposure. This may reflect the fact that those firms most engaged in trade are also the most aware of exchange rate risk, and therefore are the most likely to hedge their exposure.

Suggested Citation

Dominguez, Kathryn M.E. and Tesar, Linda L., Trade and Exposure (February 2001). NBER Working Paper No. w8129. Available at SSRN: https://ssrn.com/abstract=260542

Kathryn M.E. Dominguez (Contact Author)

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

Lorch Hall
Ann Arbor, MI 48109
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313-764-3490 (Phone)
734-763-9181 (Fax)

HOME PAGE: http://www-personal.umich.edu/~kathrynd/

National Bureau of Economic Research (NBER)

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Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-763-2254 (Phone)
734-764-2769 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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