Journal of Banking & Finance Vol. 32 No. 7 2008
Emerging market exchange rate exposure
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.
- DOI
- 10.1016/j.jbankfin.2007.11.005
- Volume
- 32
- Issue
- 7
- Pages
- 1349-1362
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref