Exchange rate variations and the behaviour of the purchasing department

Bertil Näslund

Omega, 1981, vol. 9, issue 4, 365-370

Abstract: When the risk of a devaluation is high this is likely to affect the purchasing behaviour of firms importing goods from abroad. A model is developed which shows optimal purchasing and inventory policies for firms in that situation. Another model is developed for the case when the value of a currency is changing gradually over time. The results derived in the first model are tested against empirical data from 23 large firms in Sweden and 23 subsidiaries of Swedish firms operating in different countries. The studies refer to the behaviour of the firms before and after the devaluation of the Swedish crown by 10% in August 1977.

Date: 1981
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