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International trade and the role of market transparency

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  • Broll, Udo
  • Eckwert, Bernhard
  • Wong, Kit Pong
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    Abstract

    The paper examines the economic role of market transparency on the decision problems of an international firm. Transparency is described in terms of the informativeness of a publicly observable signal. With higher transparency, the signal conveys more precise information about the random foreign exchange rate. We analyze the interaction between market transparency, ex ante expected production, domestic sales, and exports of the firm. Furthermore, we discuss the welfare implications of more transparency in the foreign exchange market for the firm and domestic consumers. --

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    File URL: http://econstor.eu/bitstream/10419/48162/1/664125751.pdf
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    Bibliographic Info

    Paper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 08/10.

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    Date of creation: 2010
    Date of revision:
    Handle: RePEc:zbw:tuddps:0810

    Contact details of provider:
    Postal: 01062 Dresden
    Phone: ++49 351 463 2196
    Fax: ++49 351 463 7739
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    Web page: http://www.tu-dresden.de/wiwi/
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    Related research

    Keywords: Blackwell theorem; information system; transparency; hedging; international trade;

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    References

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    1. Bernhard Eckwert & Itzhak Zilcha, 2003. "Incomplete risk sharing arrangements and the value of information," Economic Theory, Springer, vol. 21(1), pages 43-58, 01.
    2. Eckwert, Bernhard & Zilcha, Itzhak, 2001. "The Value of Information in Production Economies," Journal of Economic Theory, Elsevier, vol. 100(1), pages 172-186, September.
    3. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
    4. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
    5. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: the exporting firm," Dresden Discussion Paper Series in Economics 02/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
    6. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: The exporting firm," Economic Modelling, Elsevier, vol. 26(5), pages 974-977, September.
    7. Kawai, Masahiro & Zilcha, Itzhak, 1986. "International trade with forward-futures markets under exchange rate and price uncertainty," Journal of International Economics, Elsevier, vol. 20(1-2), pages 83-98, February.
    8. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June.
    9. Broll, Udo & Chow, Kong Wing & Wong, Kit Pong, 2001. "Hedging and Nonlinear Risk Exposure," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 281-96, April.
    10. Kim, Son Ku, 1995. "Efficiency of an Information System in an Agency Model," Econometrica, Econometric Society, vol. 63(1), pages 89-102, January.
    11. Hirshleifer, Jack, 1975. "Speculation and Equilibrium: Information, Risk, and Markets," The Quarterly Journal of Economics, MIT Press, vol. 89(4), pages 519-42, November.
    12. Krebs, Tom, 2005. "Fundamentals, information, and international capital flows: A welfare analysis," European Economic Review, Elsevier, vol. 49(3), pages 579-598, April.
    13. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
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