Exchange-Rate Exposure of Multinationals: Focusing on Exchange- Rate Issues

22 Pages Posted: 9 Sep 2001

See all articles by Jane E. Ihrig

Jane E. Ihrig

Federal Reserve Board - International Financial Transactions

Date Written: August 2001

Abstract

This paper examines exchange-rate exposure of multinationals (MNEs) in light of detailed exchange rate data. Specifically, using MNE-specific exchange rates and accounting for the possibility that exchange-rate crises may impact a firm differently than periods of normal fluctuations, estimates suggest 1/4 of all MNEs had significant exchange rate exposure between 1995 and 1999. On average, significant exposure is estimated to be 0.68, indicating that a firm's monthly return falls, on average, by 0.68 percentage points when the dollar appreciates one percent. This encompasses periods where there are normal fluctuations in the exchange rate and the average exposure is estimated to be 0.55, as well as crisis periods where the average exposure is estimated to be 2.8. Finally, results illustrate that MNEs operating in more than 20 countries (having more than 30 subsidiaries) have twice the exposure of MNEs operating in one country (having one subsidiary).

Keywords: crisis indicators, multinational-specific exchange rate

JEL Classification: F23, F31

Suggested Citation

Ihrig, Jane E., Exchange-Rate Exposure of Multinationals: Focusing on Exchange- Rate Issues (August 2001). FRB International Finance Discussion Paper No. 709. Available at SSRN: https://ssrn.com/abstract=282569 or http://dx.doi.org/10.2139/ssrn.282569

Jane E. Ihrig (Contact Author)

Federal Reserve Board - International Financial Transactions ( email )

20th and C Streets, NW
Washington, DC 20551
United States
202-452-3372 (Phone)
202-736-5638 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
413
Abstract Views
1,778
rank
74,054
PlumX Metrics