Economic Exposure To Exchange Rates In Jordan Companies: A Monthly Econometric Model Of The Rate Of Return Of Firms, 2004-2007
AbstractJordan’s exports and imports represent more than 36% and 81% of Jordan’s GDP respectively. Therefore, not only is Jordan’s economy highly vulnerable to change in the exchange rate, but also individual firm performances are vulnerable as well. The sensitivity of the firms’ future income to exchange rates change is a necessary measure for the risk management of the firm since economic exposure of the firm affects the profit and the value of the firm. Two variants of an exchange risk model for major Jordanian firms are proposed. These models were developed and estimated. Where Rit is the rate of return of firm i, Rmt weighted rate of return of the domestic market or domestic market portfolio, Et rate of change in the exchange rate index or relevant exchange rate, Pjt is the price of the same product or similar product by major competitor, bi is the firm beta, ci is the exchange rate impact on the rate of return (exposure risk). The inclusion of market portfolio return is to capture the impact of all other macroeconomic factors. This paper uses the monthly general stock exchange price index, published by Amman Security Exchange for the period of May 2004 until March 2007. Also, the monthly closing price of a share of “The Arab Potash” is taken at the start of each month from Amman Security Exchange. The average price of Potash per ton in $ is calculated from the data provided by the Jordan’s ministry of industry and trade. There are two major findings of this paper: (1) the models provide useful information on the economic exposure of Jordanian firms; and (2) the firm exchange rate exposure is above the market portfolio exposure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 9 (2009)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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.:
- Rina Bhattacharya, 2003. "Exchange Rate Regime Considerations for Jordan and Lebanon," IMF Working Papers 03/137, International Monetary Fund.
- Anne Epaulard & Aude Pommeret, 2004.
"Financial Integration, Growth, and Volatility,"
Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
04.18, Université de Lausanne, Faculté des HEC, DEEP.
- Jorge A. Chan-Lau, 2005. "Hedging Foreign Exchange Risk in Chile: Markets and Instruments," IMF Working Papers 05/37, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (M. Carmen Guisan).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.