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Exchange Rate Pegs and Foreign Exchange Exposure in East Asia

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  • David Parsley Helen Popper

Abstract

This paper shows that many East Asian firms are significantly exposed to foreign exchange risk. Their exposure appears to be much more widespread than is typical for the large, western industrialized economies. The paper also shows that exchange rate pegs appear to do little to alleviate this widespread exposure against currencies other than the peg. The East Asian firms studied here are most exposed to fluctuations in the U.S. dollar, and the mark and yen are important in a few countries. The extent of their exchange rate exposure has varied, but not diminished, over the last decade. The most widespread exchange rate sensitivity (not just the most exchange rate fluctuation) occurred during the Asian Crisis period; this is evident even after accounting for the local macroeconomic conditions that affect aggregate local returns.

Suggested Citation

  • David Parsley Helen Popper, 2002. "Exchange Rate Pegs and Foreign Exchange Exposure in East Asia," International Finance 0211001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0211001
    Note: Type of Document - pdf; prepared on ibm pc; to print on HP/PostScript/Franciscan monk; pages: 24; figures: 0
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0211/0211001.pdf
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    References listed on IDEAS

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    Cited by:

    1. Uluc Aysun & Melanie Guldi, 2008. "Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Working papers 2008-06, University of Connecticut, Department of Economics, revised Oct 2008.
    2. Mr. Barry J. Eichengreen & Mr. Hui Tong, 2011. "The External Impact of China'S Exchange Rate Policy: Evidence From Firm Level Data," IMF Working Papers 2011/155, International Monetary Fund.
    3. Bartram, Söhnke M. & Brown, Gregory W. & Minton, Bernadette A., 2010. "Resolving the exposure puzzle: The many facets of exchange rate exposure," Journal of Financial Economics, Elsevier, vol. 95(2), pages 148-173, February.
    4. repec:dau:papers:123456789/15237 is not listed on IDEAS

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    More about this item

    Keywords

    foreign exchange exposure; exchange rate pegs; east asia;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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