Abstract
We estimate the exposure of emerging market companies to fluctuations in their domestic exchange rates. We use an instrumental-variable approach that identifies the total exposure of a company to exchange rate movements, yet abstracts from the influence of confounding macroeconomic shocks. In the sub-period of 1999-2002, we find that depreciations tend to have a negative impact on emerging market stock returns. In the sub-period of 2002-2006, this tendency has largely disappeared. Since we estimate the exchange rate exposure of firms from different countries with a common set of instruments, we can make coherent, cross-country comparisons of their determinants. We find that the impact of various measures of debt on exchange rate exposure, which is negative and significant in the early sub-period, becomes insignificant and even reverses sign in the recent sub-period.
Original language | English |
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Pages (from-to) | 1349-1362 |
Number of pages | 14 |
Journal | Journal of Banking and Finance |
Volume | 32 |
Issue number | 7 |
DOIs | |
Publication status | Published - 1 Jul 2008 |
Keywords
- Emerging market
- Exchange rate exposure
- International debt
ASJC Scopus subject areas
- Finance
- Economics and Econometrics