Exchange Rate Exposure, Foreign Currency Derivatives and the Introduction of the Euro: French Evidence
31 Pages Posted: 7 Feb 2004
In this paper, we investigative the impact of the introduction of the Euro on exchange rate exposures and the subsequent hedging practices of a sample of French corporations. Our findings indicate that the introduction of the Euro led to both a reduction in the number of firms that have significant exchange rate exposure and the absolute size of exposure. In response to these reduced exposures, French firms tend to use foreign currency derivatives less intensively although there has been no change in the number of firms that make use of the instruments. Furthermore, the use of foreign currency derivatives is found to be effective in managing exchange rate exposure but there is insufficient evidence that these instruments are more effective in post Euro periods.
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