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Exchange Rate Exposure, Foreign Currency Debt, and the Use of Derivatives: Evidence from Brazil

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  • José Luiz Rossi Júnior

Abstract

This paper studies the exchange rate exposure and its determinants for a sample of nonfinancial Brazilian companies from 1996 to 2006. The results indicate that the number of firms exposed to exchange rate fluctuations is higher in periods of crisis and under a fixed exchange rate regime. In addition, the results point out that, although companies' international activities, operational hedging, and financial policies are important determinants of firms' exposure, the changes in companies' exposure that took place when Brazil moved from a fixed to a floating exchange rate regime were mainly driven by changes in companies' foreign currency borrowing and the use of derivatives that occurred in that period.

Suggested Citation

  • José Luiz Rossi Júnior, 2011. "Exchange Rate Exposure, Foreign Currency Debt, and the Use of Derivatives: Evidence from Brazil," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 67-89, January.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:1:p:67-89
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    Citations

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    Cited by:

    1. Ye, Min & Hutson, Elaine & Muckley, Cal, 2014. "Exchange rate regimes and foreign exchange exposure: The case of emerging market firms," Emerging Markets Review, Elsevier, vol. 21(C), pages 156-182.
    2. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.
    3. M. Frömmel & M. Luetje, 2014. "Are exporting firms always a good hedge against currency risk? Evidence from Central and Eastern European Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/873, Ghent University, Faculty of Economics and Business Administration.
    4. Ekta Sikarwar & Ganesh Kumar Nidugala, 2018. "Effect of Central Bank Intervention in Estimating Exchange Rate Exposure: Evidence from an Emerging Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1), pages 60-95, April.
    5. 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.
    6. Tkalec, Marina & Vizek, Maruška & Verbič, Miroslav, 2014. "Balance sheet effects and original sinners’ risk premiums," Economic Systems, Elsevier, vol. 38(4), pages 597-613.

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