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Estimating Exchange Rate Exposure of Trade-intensive Firms: Application to Korean Oil-refiners and Petrochemicals

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  • Sunghee Choi

Abstract

The purpose of this paper is to empirically investigate exchange rate exposure of Korean oil-refining and petrochemical firms whose profit structure highly depends on exchange rate changes. The primary finding is that about 50% out of the total sample firms is significantly exposed to exchange rate changes when the changes are sizable. In terms of exchange rate type, a bilateral rate between US dollar and Korean won is found to be more effective for estimating significant exposure of the Korean oil-refiners and petrochemicals rather than an industry-specific exchange rate index. In addition, using the Fama and French decomposition approach, this paper finds exposure sensitivity factors with results that conglomerate affiliation, number of employees, or business scope diversification significantly lowers degree of exposure.

Suggested Citation

  • Sunghee Choi, 2010. "Estimating Exchange Rate Exposure of Trade-intensive Firms: Application to Korean Oil-refiners and Petrochemicals," Global Economic Review, Taylor & Francis Journals, vol. 39(3), pages 327-348.
    • Handle: RePEc:taf:glecrv:v:39:y:2010:i:3:p:327-348
    DOI: 10.1080/1226508X.2010.513144
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    References listed on IDEAS

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    Cited by:

    1. Sunghee Choi & Md. Abdus Salam & Ki-Dong Lee, 2019. "The Nature of Exchange Rate Movements and Exchange Rate Exposure: The Bangladesh Case," Journal of South Asian Development, , vol. 14(2), pages 180-222, August.
    2. Taeyoon Sung & Danbee Park & Ki Young Park, 2014. "Short-Term External Debt and Foreign Exchange Rate Volatility in Emerging Economies: Evidence from the Korea Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S6), pages 138-157, November.
    3. Mojisola Olugbode & Ahmed El-Masry & John Pointon, 2014. "Exchange Rate and Interest Rate Exposure of UK Industries Using First-order Autoregressive Exponential GARCH-in-mean (EGARCH-M) Approach," Manchester School, University of Manchester, vol. 82(4), pages 409-464, July.

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