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Hedging Behaviour of Czech Exporting Firms

Author

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  • Vlastimil Cadek
  • Helena Rottova
  • Branislav Saxa

Abstract

The hedging behaviour of Czech exporting firms is analysed using questionnaire information and interviews with banks. Approximately 60% of the 184 firms surveyed hedge their FX exposures, and about 88% of their exports are hedged. Most exporters use natural hedging, i.e. they balance incoming and outgoing payments in foreign currency as well as foreign currency assets and liabilities. Hedgers on financial markets prefer forwards and zero-cost option structures, as they are reluctant to pay option premiums. The typical maturity of financial instruments is three months to one year. More than one half of exporters hedge consistently, while around 60% hedge actively, taking advantage of currency moves. Our simple model of hedging behaviour for example suggests that trading within a group reduces the need for hedging.

Suggested Citation

  • Vlastimil Cadek & Helena Rottova & Branislav Saxa, 2011. "Hedging Behaviour of Czech Exporting Firms," Working Papers 2011/14, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2011/14
    as

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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2011_14.pdf
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    References listed on IDEAS

    as
    1. Jan Babecky & Kamil Dybczak & Kamil Galuscak, 2008. "Survey on Wage and Price Formation of Czech Firms," Working Papers 2008/12, Czech National Bank.
    2. Söhnke M. Bartram & Gregory W. Brown & Frank R. Fehle, 2009. "International Evidence on Financial Derivatives Usage," Financial Management, Financial Management Association International, vol. 38(1), pages 185-206, March.
    3. Ralf Fendel & Michael Frenkel & Christoph Swonke, 2008. "Local Currency Pricing versus Producer Currency Pricing: Direct Evidence from German Exporters," German Economic Review, Verein für Socialpolitik, vol. 9, pages 160-179, May.
    4. Ralf Fendel & Michael Frenkel & Christoph Swonke, 2008. "Local Currency Pricing versus Producer Currency Pricing: Direct Evidence from German Exporters," German Economic Review, Verein für Socialpolitik, vol. 9(2), pages 160-179, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Peter Tóth, 2014. "To What Extent Can Czech Exporters Cushion Exchange Rate Shocks through Imported Inputs?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 74-93.
    2. Jan Christoph Neumann, 2020. "An Empirical Analysis of the Currency Hedging Behavior of North German SMEs," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 6(1), pages 53-65.
    3. Peter Toth, 2013. "Currency Shocks to Export Sales of Importers: A Heterogeneous Firms Model and Czech Micro Estimates," Working Papers 2013/04, Czech National Bank.
    4. Martínez-Zarzoso, Inmaculada & Johannsen, Florian, 2017. "Monetary uncertainty and trade in Eastern Europe and Central Asia: A firm-level analysis," International Business Review, Elsevier, vol. 26(3), pages 476-490.
    5. Mariia Bondarenko & Karel Brůna, 2021. "The Impact of FX Exposure on the Firm's Stock Market Return," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2021(1), pages 45-70.
    6. Faruk Miguel Liriano, 2017. "The use of foreign exchange derivatives by exporters and importers: the Chilean experience," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43, Bank for International Settlements.

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    More about this item

    Keywords

    Exchange rate exposure; exchange rate risk; exports; hedging behaviour.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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