Currency risks, government procurement and counter-trade: a note

Sang-Rim Choi and Adrian Tschoegl ()

Applied Financial Economics, 2003, vol. 13, issue 12, 885-889

Abstract: Government agencies that procure goods from abroad typically face various risks, particularly uncertainty over future real prices. Interestingly, the agencies can use a counter-trade transaction to solve the real price problem. Because both sides of a counter-trade deal are real goods, not financial instruments, counter-trade can solve the inflation risk involved in foreign currency procurement. Counter-trade therefore can sometimes dominate financial instruments as a way to hedge.

Date: 2003
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DOI: 10.1080/0960310032000129644

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