IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v8y1992i1p31-40.html

International investments and exchange rate risk

Author

Listed:
  • Broll, Udo
  • Wahl, Jack E.

Abstract

In this paper we consider a risk averse multinational firm under exchange rate risk. We analyze the impact of exchange rate risk and of the use of currency forwards upon the firm's global market decisions with respect to international firm-specific capital allocation and direct foreign investment. A rise in exchange risk lowers the holdings of foreign real assets provided that there are no external hedging instruments. However, when forward markets exist, the firm's optimal holdings of foreign assets are independent of its attitude towards risk. Furthermore we show that direct foreign investments are increasing with the introduction of forward markets if firm-specific capital and direct investments are complementary factors.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Broll, Udo & Wahl, Jack E., 1992. "International investments and exchange rate risk," European Journal of Political Economy, Elsevier, vol. 8(1), pages 31-40, February.
    • Handle: RePEc:eee:poleco:v:8:y:1992:i:1:p:31-40
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0176-2680(92)90056-M
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Franke, Günter, 2004. "Präferenzfreie Strategien zum Absichern von Wechselkursrisiken," CoFE Discussion Papers 04/07, University of Konstanz, Center of Finance and Econometrics (CoFE).
    2. Padhi, Sidhartha S. & Mukherjee, Soumyatanu & Edwin Cheng, T.C., 2024. "Optimal investment decision for industry 4.0 under uncertainties of capability and competence building for managing supply chain risks," International Journal of Production Economics, Elsevier, vol. 267(C).
    3. Broll, Udo & Wahl, Jack E., 1991. "Hedging with synthetical forwards and the export decision," Discussion Papers, Series II 134, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    4. Nadine McCloud & Michael S. Delgado & Man Jin, 2024. "Foreign capital inflows, exchange rates, and government stability," Empirical Economics, Springer, vol. 66(3), pages 945-977, March.
    5. Bond, Eric & Estache, Antonio & DEC, 1994. "Which foreign investors worry about foreign exchange risk in South Asia and why?," Policy Research Working Paper Series 1344, The World Bank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:8:y:1992:i:1:p:31-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.