The Response of Multinationals’ Foreign Exchange Rate Exposure to Macroeconomic News

28 Pages Posted: 1 Aug 2017 Last revised: 13 Mar 2019

See all articles by Kris Boudt

Kris Boudt

Ghent University; Vrije Universiteit Brussel; Vrije Universiteit Amsterdam

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Piet Sercu

FEB at KU Leuven

Marjan Wauters

Vrije Universiteit Brussel (VUB)

Date Written: 2017-07-31

Abstract

We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms’ foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.

Keywords: Foreign exchange exposure, High-frequency data, Macro

JEL Classification: E3, F3, F44, G14

Suggested Citation

Boudt, Kris and Neely, Christopher J. and Sercu, Piet M. F. A. and Wauters, Marjan, The Response of Multinationals’ Foreign Exchange Rate Exposure to Macroeconomic News (2017-07-31). FRB St. Louis Working Paper No. 2017-20, Available at SSRN: https://ssrn.com/abstract=3011839 or http://dx.doi.org/10.20955/wp/2017.020

Kris Boudt (Contact Author)

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

Vrije Universiteit Brussel ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States
314-444-8568 (Phone)
314-444-8731 (Fax)

HOME PAGE: http://www.stls.frb.org/research/econ/cneely/

Piet M. F. A. Sercu

FEB at KU Leuven ( email )

Naamsestraat 69
Faculty of Economics and Business
Leuven, 3000
Belgium
+32 16 32 67 56 (Phone)
+32 16 32 67 32 (Fax)

Marjan Wauters

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

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