International trade and the role of market transparency

Udo Broll, Bernhard Eckwert and Kit Pong Wong

No 08/10, Dresden Discussion Paper Series in Economics from Technische Universität Dresden, Faculty of Business and Economics, Department of Economics

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.

Keywords: Blackwell theorem; information system; transparency; hedging; international trade (search for similar items in EconPapers)
JEL-codes: F11 F23 G14 G15 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuddps:0810

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