Emerging market exchange rate exposure

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55 Citations (Scopus)

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 languageEnglish
Pages (from-to)1349-1362
Number of pages14
JournalJournal of Banking and Finance
Volume32
Issue number7
DOIs
Publication statusPublished - 1 Jul 2008

Keywords

  • Emerging market
  • Exchange rate exposure
  • International debt

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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