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The Exchange Rate and Company Failure in a Macro-Micro Model of the UK Company Sector

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  • Goudie, A W
  • Meeks, G
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    Abstract

    A macro-micro model is presented which is used to predict company failure. It bridges the gap between previous macroeconomic models and the microeconomic approach to company failure in the finance literature: it can trace the probable effects of exogenous macroeconomic shocks upon the finances and the viability of individual members of the company sector. A series of simulation exercises using this model quantifies the impact of variations in the exchange rate upon the failure rate among the top one hundred U.K. companies. This impact is shown to be substantial, asymmetric, and at times nonlinear. Copyright 1991 by Royal Economic Society.

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    Bibliographic Info

    Article provided by Royal Economic Society in its journal The Economic Journal.

    Volume (Year): 101 (1991)
    Issue (Month): 406 (May)
    Pages: 444-57

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    Handle: RePEc:ecj:econjl:v:101:y:1991:i:406:p:444-57

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    Cited by:
    1. JOHN HUNTER & Natalia Isachenkova, 2003. "A Panel Analysis Of Uk Industrial Company Failure," Economics and Finance Discussion Papers 03-10, Economics and Finance Section, School of Social Sciences, Brunel University.
    2. John Hunter & Natalia Isachenkova, 2004. "Aggregate Economy Risk And Company Failure:An Examination Of Uk Quoted Firms In The Early 1990s," Money Macro and Finance (MMF) Research Group Conference 2004 74, Money Macro and Finance Research Group.
    3. Cheung, L. & Levy, A., 1998. "An Integrative Analysis of Business Bankruptcy in Australia," Economics Working Papers wp98-03, School of Economics, University of Wollongong, NSW, Australia.
    4. Philip Bunn & Victoria Redwood, 2003. "Company accounts based modelling of business failures and the implications for financial stability," Bank of England working papers 210, Bank of England.
    5. C. Higson & S. Holly & P. Kattuman & S. Platis, 2004. "The Business Cycle, Macroeconomic Shocks and the Cross-Section: The Growth of UK Quoted Companies," Economica, London School of Economics and Political Science, vol. 71(281), pages 299-318, 05.
    6. Arnab Bhattacharjee & Chris Higson & Sean Holly & Paul Kattuman, 2007. "Macroeconomic Conditions and Business Exit: Determinants of Failures and Acquisitions of UK Firms," CDMA Working Paper Series 200713, Centre for Dynamic Macroeconomic Analysis.

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