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Volkswirtschaft - Open Access LMU - Teil 03/03Language: de Contact email: Get it Feed URL: Get it iTunes ID: Get it |
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Operational Hedging of
Exchange Rate Risks
Thursday, 10 November, 2016
Exchange rate exposure of firms diminishes when imported intermediates and exports are denominated in currencies that move together. Appreciations of the domestic currency, raising foreign currency export prices, then also reduce marginal costs, allowing firms to counter the increase in foreign prices. Using firm-level data from seven European countries I estimate a structural model showing how exchange rate pass-through into sales depends on intermediate imports and the co-movement of export and import related exchange rates. I find that operational hedging requires firms to intentionally choose export and import regions with comoving currencies. Analyzing the locational choice of firms confirms that the co-movement of currencies indeed appears to be taken into consideration
