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Exposure and Markups

George Allayannis1; Jane Ihrig2,3

1 University of Virginia · 2 Federal Reserve · 3 Federal Reserve Board of Governors

Review of Financial Studies 2001

This article examines how to properly specify and test for factors that affect exchange-rate exposure. Starting from theoretical underpinnings and a sample of U.S. manufacturing industries between 1979 and 1995, we find that 4 of 18 industry groups are significantly exposed to exchange-rate movements through the effect of industry competitive structure, export share, and imported input share. On average, a 1% appreciation of the dollar decreases the return of the average industry by 0.13%. Consistent with our model’s predictions, as an industry’s markups fall (rise), its exchange-rate exposure increases (decreases).

DOI
10.1093/rfs/14.3.805
Volume
14 (3)
Pages
805-835
Language
en
Export
BibTeX
Sources
openalex crossref