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Foreign Exchange Exposure and Exchange Rate Arrangements in East Asia

Author

Listed:
  • David Parsley

    (Vanderbilt University)

  • Helen Popper

    (Santa Clara University)

Abstract

This paper shows that many East Asian firms are significantly exposed to foreign exchange risk. Their exposure appears to be much more widespread than is typical for the large industrialized economies. The East Asian firms are most exposed to fluctuations in the U.S. dollar, though the mark and yen are important in a few countries. The extent of exchange rate exposure has varied over the last decade, but it does not appear to have diminished. The most widespread exchange rate sensitivity (not just the most exchange rate fluctuation) occurred during the Asian Crisis period; this is evident even after accounting for the local macroeconomic conditions that affect aggregate local returns. Finally, the East Asian evidence examined here provides no support for the idea that an exchange rate peg reduces foreign exchange exposure.

Suggested Citation

  • David Parsley & Helen Popper, 2002. "Foreign Exchange Exposure and Exchange Rate Arrangements in East Asia," Working Papers 172002, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:172002
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    References listed on IDEAS

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    3. Campa, Jose & Goldberg, Linda S., 1995. "Investment in manufacturing, exchange rates and external exposure," Journal of International Economics, Elsevier, vol. 38(3-4), pages 297-320, May.
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    6. Bodnar, Gordon M. & Gentry, William M., 1993. "Exchange rate exposure and industry characteristics: evidence from Canada, Japan, and the USA," Journal of International Money and Finance, Elsevier, vol. 12(1), pages 29-45, February.
    7. Chamberlain, Sandra & Howe, John S. & Popper, Helen, 1997. "The exchange rate exposure of U.S. and Japanese banking institutions," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 871-892, June.
    8. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-984, June.
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    10. Jorion, Philippe, 1990. "The Exchange-Rate Exposure of U.S. Multinationals," The Journal of Business, University of Chicago Press, vol. 63(3), pages 331-345, July.
    11. Parsley, David C & Popper, Helen A, 2001. "Official Exchange Rate Arrangements and Real Exchange Rate Behavior," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 976-993, November.
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    Cited by:

    1. Uluc Aysun & Melanie Guldi, 2008. "Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Working papers 2008-06, University of Connecticut, Department of Economics, revised Oct 2008.

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