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Emerging market exchange rate exposure

Authors Chue, Timothy K. HKUST affiliated (currently or previously)
Cook, David View this author's profile
Issue Date 2008
Source Journal of banking & finance , v. 32, (7), 2008, JUL, p. 1349-1362
Summary 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. (C) 2007 Elsevier B.V. All rights reserved.
ISSN 0378-4266
Language English
Format Article
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