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Risk preferences estimation of exporting firms under exchange rate uncertainty

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  • Udo Broll
  • Soumyatanu Mukherjee
  • Rudra Sensarma

Abstract

This note empirically analyses how exchange rate fluctuations affects firms’ optimal production and exporting decisions. A firm’s elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible utility function that incorporates all possible risk preferences, a unique structurally estimable equation is derived. Quantile regression method is used to estimate this equation and compute the risk aversion elasticities for a panel of Indian firms. This approach allows us to demonstrate how characteristics of exporters at the intensive margin varies with the level of elasticities across the conditional exchange rate distribution.

Suggested Citation

  • Udo Broll & Soumyatanu Mukherjee & Rudra Sensarma, 2020. "Risk preferences estimation of exporting firms under exchange rate uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(1), pages 126-136, February.
    • Handle: RePEc:bla:scotjp:v:67:y:2020:i:1:p:126-136
    DOI: 10.1111/sjpe.12226
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    References listed on IDEAS

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    Cited by:

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    3. Subhadip Mukherjee & Soumyatanu Mukherjee & Tapas Mishra & Udo Broll, 2019. "Export investment under uncertainty: a mean-variance decision analysis for Indian manufacturing exporters," Discussion Papers 2019-18, University of Nottingham, GEP.

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