Economics at your fingertips  

Does the currency regime shape unhedged currency exposure?

Ila Patnaik () and Ajay Shah

Journal of International Money and Finance, 2010, vol. 29, issue 5, 760-769

Abstract: This paper examines how unhedged currency exposure of firms varies with changes in currency flexibility. A sequence of four time periods with alternating high and low currency volatility in India provides a natural experiment in which changes in currency exposure of a panel of firms is measured, and the moral hazard versus incomplete markets hypotheses tested. We find that firms carried higher currency exposure in periods when the currency was less flexible. Our results support the moral hazard hypothesis: that low currency flexibility encourages firms to hold unhedged exposure in response to implicit government guarantees.

Keywords: Exchange; rate; regime; Currency; exposure; of; firms; Moral; hazard (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does the Currency Regime Shape Unhedged Currency Exposure? (2009) Downloads
Working Paper: Does the currency regime shape unhedged currency exposure (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-09-12
Handle: RePEc:eee:jimfin:v:29:y:2010:i:5:p:760-769