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International trade and the role of market transparency

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  • Broll, Udo
  • Eckwert, Bernhard
  • Wong, Kit Pong

Abstract

The paper examines the economic role of market transparency on the decision problems of an international firm. Transparency is described in terms of the informativeness of a publicly observable signal. With higher transparency, the signal conveys more precise information about the random foreign exchange rate. We analyze the interaction between market transparency, ex ante expected production, domestic sales, and exports of the firm. Furthermore, we discuss the welfare implications of more transparency in the foreign exchange market for the firm and domestic consumers.

Suggested Citation

  • Broll, Udo & Eckwert, Bernhard & Wong, Kit Pong, 2010. "International trade and the role of market transparency," Dresden Discussion Paper Series in Economics 08/10, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    • Handle: RePEc:zbw:tuddps:0810
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    References listed on IDEAS

    as
    1. Krebs, Tom, 2005. "Fundamentals, information, and international capital flows: A welfare analysis," European Economic Review, Elsevier, vol. 49(3), pages 579-598, April.
    2. Bernhard Eckwert & Itzhak Zilcha, 2003. "Incomplete risk sharing arrangements and the value of information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 43-58, January.
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    6. J. Hirshleifer, 1975. "Speculation and Equilibrium: Information, Risk, and Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 89(4), pages 519-542.
    7. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June.
    8. Eckwert, Bernhard & Zilcha, Itzhak, 2001. "The Value of Information in Production Economies," Journal of Economic Theory, Elsevier, vol. 100(1), pages 172-186, September.
    9. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
    10. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: The exporting firm," Economic Modelling, Elsevier, vol. 26(5), pages 974-977, September.
    11. Broll, Udo & Chow, Kong Wing & Wong, Kit Pong, 2001. "Hedging and Nonlinear Risk Exposure," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 281-296, April.
    12. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: the exporting firm," Dresden Discussion Paper Series in Economics 02/09, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    13. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    14. Kawai, Masahiro & Zilcha, Itzhak, 1986. "International trade with forward-futures markets under exchange rate and price uncertainty," Journal of International Economics, Elsevier, vol. 20(1-2), pages 83-98, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Blackwell theorem; information system; transparency; hedging; international trade;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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