Foreign Exchange Exposure and Exchange Rate Arrangements in East Asia
AbstractThis paper shows that many East Asian firms are significantly exposed to foreign exchange risk. Their exposure appears to be much more widespread than is typical for the large industrialized economies. The East Asian firms are most exposed to fluctuations in the U.S. dollar, though the mark and yen are important in a few countries. The extent of exchange rate exposure has varied over the last decade, but it does not appear to have diminished. The most widespread exchange rate sensitivity (not just the most exchange rate fluctuation) occurred during the Asian Crisis period; this is evident even after accounting for the local macroeconomic conditions that affect aggregate local returns. Finally, the East Asian evidence examined here provides no support for the idea that an exchange rate peg reduces foreign exchange exposure.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 172002.
Length: 20 pages
Date of creation: Oct 2002
Date of revision:
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