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Hedging, Speculation, And Investment In Balance-Sheet Triggered Currency Crises Author info | Abstract | Publisher info | Download info | Related research | Statistics ANDREAS RÖTHIG
WILLI SEMMLER
PETER FLASCHEL
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This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an open economy with a flexible exchange rate regime. Firms use currency futures contracts to manage their exchange rate exposure - caused by balance sheet effects as in Krugman (2000)- and therefore their investments' sensitivity to currency risk. We find that, depending on whether futures contracts are used for risk reduction (i.e. hedging) or risk taking (i.e. speculation), the implied magnitudes of recessions and booms are decreased or increased. Corporate risk management can therefore substantially affect economic stability on the macrolevel. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd/University of Adelaide and Flinders University .
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Article provided by Blackwell Publishing in its journal Australian Economic Papers .
Volume (Year): 46 (2007)
Issue (Month): 3 (09)
Pages: 224-233
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Handle: RePEc:bla:ausecp:v:46:y:2007:i:3:p:224-233Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X
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Paper Andreas Röthig & Willi Semmler & Peter Flaschel, 2006.
"Hedging, Speculation, and Investment in Balance-Sheet Triggered Currency Crises ,"
Darmstadt Discussion Papers in Economics
168, Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology).
[Downloadable!] Andreas Röthig & Willi Semmler & Peter Flaschel, 2006.
"Hedging, Speculation, and Investment in Balance-Sheet Triggered Currency Crises ,"
Research Paper Series
173, Quantitative Finance Research Centre, University of Technology, Sydney.
[Downloadable!] References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993.
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Other versions: DeMarzo, Peter M & Duffie, Darrell, 1995.
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Review of Financial Studies ,
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Peter Tufano, 1998.
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Financial Management ,
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Smith, Clifford W. & Stulz, Ren? M., 1985.
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Journal of Financial and Quantitative Analysis ,
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Fatemi, Ali & Luft, Carl, 2002.
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Gerald D. Gay & Jouahn Nam, 1998.
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Financial Management ,
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Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1994.
"A Framework For Risk Management ,"
Journal of Applied Corporate Finance ,
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[Downloadable!] (restricted)
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