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FX Hedging Behavior among Thai Exporters: A Micro-level Evidence

Author

Listed:
  • Thethach Chuaprapaisilp
  • Nathapong Rujiravanich
  • Bovornrach Saengsith

Abstract

Over the past 20 years, Thailand's FX hedging market has evolved to accommodate demands from rising trade and investment activities. Notwithstanding the growth in the use of FX derivative instruments for investment risk management by outward investment funds and non-residents, FX hedging demand from merchandise trade remains a significant part of the market. This paper utilizes a transactional database that disaggregates exporters according to their firm-level characteristics in order to explain their hedging behavior over periods of exchange rate fluctuation. FX hedging by exporters is found to be sensitive to the movement in exchange rate and past hedging experience. These sensitivities give rise to periods of panic or complacency. The effects also vary across exporters with different sizes.

Suggested Citation

  • Thethach Chuaprapaisilp & Nathapong Rujiravanich & Bovornrach Saengsith, 2018. "FX Hedging Behavior among Thai Exporters: A Micro-level Evidence," PIER Discussion Papers 81, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:81
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    File URL: https://www.pier.or.th/files/dp/pier_dp_081.pdf
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    References listed on IDEAS

    as
    1. Richard Fabling & Arthur Grimes, 2015. "Over the Hedge: Do Exporters Practice Selective Hedging?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(4), pages 321-338, April.
    2. Yunyong Thaicharoen & Punpilas Ruangwisut & Jirapol Mahuttikarn, 2005. "Improving Financial Resilience of the Thai Economy Against Exchange Rate Risk," Working Papers 2005-02, Monetary Policy Group, Bank of Thailand.
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    Cited by:

    1. Bank for International Settlements, 2021. "Changing patterns of capital flows," CGFS Papers, Bank for International Settlements, number 66, december.

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    More about this item

    Keywords

    Currency Hedging; Hedging Market; Hedging Behavior;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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