Does the traditional exchange rate fully explain firms’ exposure?

Heeho Kim () and Hyunchul Lee

Applied Economics Letters, 2017, vol. 24, issue 1, 8-13

Abstract: This study aims to explore the role of the cross exchange rate as a form of market competition, which has previously been omitted as an explanatory variable in estimating the risk exposure of the standard exchange. To the end, we develop a model of exporting firms that reflects exposure to market interaction and mark-up in a duopolistic export market. Using monthly data of stock returns and cross exchange rates of two oligopoly industries (i.e. semiconductor and steel & iron), our empirical evidence supports our hypothesis that cross exchange rates significantly explain firm value.

Date: 2017
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DOI: 10.1080/13504851.2016.1156229

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