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Unconditional and conditional exchange rate exposure

  • Chaieb, Ines
  • Mazzotta, Stefano

We re-examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of U.S. firms to two currency indices. Firms are clustered into eleven industries. The sample includes exporters and non-exporters. Using a panel approach, we uncover statistically significant and sizable unconditional exposure. We also examine the dynamics of exchange rate exposure modeled as a function of business cycle indicators and firm characteristics. We find that exposure varies over time with macroeconomic and financial variables and increases during economic contractions. Deviations from the unconditional measure of exposure driven by the macroeconomic variables are economically meaningful.

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File URL: http://www.sciencedirect.com/science/article/pii/S0261560612001465
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 32 (2013)
Issue (Month): C ()
Pages: 781-808

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Handle: RePEc:eee:jimfin:v:32:y:2013:i:c:p:781-808
DOI: 10.1016/j.jimonfin.2012.07.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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