The Impact of Exchange Rate Fluctuations on the Performance of Domestic Manufacturing Companies

Recently, the behavior of the Korean won (KRW) versus the US dollar (USD) has exhibited sig­nificant volatility. In 2023 alone, the exchange rate fluctuated by more than KRW 10 on over 50 different days, which has made it difficult to predict future trends. In this paper, we explore how the volatility of the KRW-USD exchange rate has influenced the fortunes of domestic Korean manufacturers. Specifically, we quan­titatively examine the impact of exchange rate fluctuations on corporate performance through an empirical analysis of exchange rate data and financial records, and use the findings of the analysis to determine implications for policy. For this work we utilized real effective ex­change rate data from the Organisation for Eco­nomic Co-operation and Development (OECD) and Japanese think tank Research Institute of Economy, Trade, & Industry (RIETI). Real effec­tive exchange rate data present exchange rate data in terms of a currency’s purchasing power relative to foreign currencies. A decrease in the real effective exchange rate implies a decrease in any given currency’s purchasing power compared to foreign currencies. Thank you for reading this abstract of a paper by the Korea Institute for Industrial Economics and Trade! We are South Korea's premier think tank studying the nexus where trade and industry intersect.