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Financial Liberalization and the Exchange-Rate Exposure of the Taiwanese Firms: A Nonparametric Analysis of Taiwan

Author

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  • Jang-Ting Guo

    (University of California–Riverside, U.S.A.)

  • Rong-Chang Wu

    (Shin Chien University, Taiwan)

Abstract

This article adopts a nonparametric approach to examine the exchange-rate exposure of Taiwanese firms between December 1979 and January 1995. The evidence indicates that financial liberalization that took place in July 1987 has introduced an important structural break to firms' foreign exchange exposure. In the pre-liberalization period, no industry shows significant exposure to changes in the exchange rate. By contrast, in the post-liberalization period, exchange-rate movements exert significant contemporaneous and lagged impacts on the value of firms, particularly those with high involvement in international trade.

Suggested Citation

  • Jang-Ting Guo & Rong-Chang Wu, 1998. "Financial Liberalization and the Exchange-Rate Exposure of the Taiwanese Firms: A Nonparametric Analysis of Taiwan," Multinational Finance Journal, Multinational Finance Journal, vol. 2(1), pages 37-61, March.
    • Handle: RePEc:mfj:journl:v:2:y:1998:i:1:p:37-61
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    References listed on IDEAS

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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.
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    Cited by:

    1. Manfred Fruhwirth & Paul Schneider & Markus S. Schwaiger, 2007. "Timing Decisions in a Multinational Context: Implementing the Amin/Bodurtha Framework," Multinational Finance Journal, Multinational Finance Journal, vol. 11(3-4), pages 157-178, September.
    2. Aysun, Uluc & Guldi, Melanie, 2011. "Exchange rate exposure: A nonparametric approach," Emerging Markets Review, Elsevier, vol. 12(4), pages 321-337.
    3. Yau, Hwey-Yun & Nieh, Chien-Chung, 2009. "Testing for cointegration with threshold effect between stock prices and exchange rates in Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 21(3), pages 292-300, August.

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    More about this item

    Keywords

    financial liberalization; foreign exchange exposure effect; nonparametric econometrics;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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