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Does the traditional exchange rate fully explain firms’ exposure?

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  • Heeho Kim
  • Hyunchul Lee

Abstract

This study aims to explore the role of the cross exchange rate as a form of market competition, which has previously been omitted as an explanatory variable in estimating the risk exposure of the standard exchange. To the end, we develop a model of exporting firms that reflects exposure to market interaction and mark-up in a duopolistic export market. Using monthly data of stock returns and cross exchange rates of two oligopoly industries (i.e. semiconductor and steel & iron), our empirical evidence supports our hypothesis that cross exchange rates significantly explain firm value.

Suggested Citation

  • Heeho Kim & Hyunchul Lee, 2017. "Does the traditional exchange rate fully explain firms’ exposure?," Applied Economics Letters, Taylor & Francis Journals, vol. 24(1), pages 8-13, January.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:1:p:8-13
    DOI: 10.1080/13504851.2016.1156229
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