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Insights Into Central And Eastern European Countries Competitiveness: On The Exposure Of Capital Markets To Exchange Rate Risk

Author

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  • Alexandra HOROBET

    (Academy of Economic Studies, Bucharest)

  • Sorin DUMITRESCU

    (Academy of Economic Studies, Bucharest)

Abstract

Unexpected fluctuations in exchange rates represent a matter of concern for all businesses nowadays as the volatility in exchange rates impacts businesses’ cash flows, revenues and expenses, and eventually is reflected in the company’s risk-return profile. Companies’ exposures to exchange rate risk have considerably increased in the past decades, given the boost in international operations and the continuous diversification of businesses’ activities at the global level. Despite the attention that businesses display to nominal exchange rates changes, it is the real exchange rate that should be of more concern to corporate managers, since they induce changes at the level of the competitiveness of the business. Our paper comparatively analyzes the exposure to changes in the nominal and real exchanges rates of the local currencies that companies from a number of four Central and Eastern European countries (Romania, Hungary, Czech Republic and Poland) and investigates the nature of the relationship between stock market performance and exchange rates in the four countries under consideration. We find limited evidence for contemporaneous and asymmetric exposure to nominal and real exchange rate risk in all four countries, but consistent evidence for three to four months lagged exposure.

Suggested Citation

  • Alexandra HOROBET & Sorin DUMITRESCU, 2008. "Insights Into Central And Eastern European Countries Competitiveness: On The Exposure Of Capital Markets To Exchange Rate Risk," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 2, pages 107-125, November.
  • Handle: RePEc:aic:revebs:y:2008:i:2:horobeta
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    Citations

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    Cited by:

    1. Christos Nikas & Student Anastasia Blouchoutzi, 2014. "Emigrants’ Remittances and the “Dutch Disease” in Small Transition Economies: the Case Of Albania and Moldova," Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 45-65, March.
    2. repec:ovi:oviste:v:xvii:y:2017:i:1:p:413-418 is not listed on IDEAS
    3. Mirela NICHITA, 2015. "Regression Model For Risk Reporting In Financial Statements Of Accounting Services Entities," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 8, pages 101-107, June.
    4. Mirela Elena Nichita & Marcel VULPOI, 2016. "Relationship between risk and transparency in the financial statements of professional services entities," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 14(137), pages 540-540, April.
    5. Alexandra HOROBET & Livia ILIE, 2009. "On The Exchange Rate Risk Contribution To The Performance Of International Investments: The Case Of Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 3, pages 57-83, May.

    More about this item

    Keywords

    exposure; exchange rate risk; nominal exchange rate; real exchange rate;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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