The effect of exchange rate fluctuations on multinationals' returns

Jane E. Ihrig and David Prior
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Jane E. Ihrig: https://www.federalreserve.gov/econres/jane-e-ihrig.htm

No 782, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. nonfinancial multinationals. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases the number of significantly exposed firms in a simple Jorion (1990) regression by 60 percent. Then separating crisis from non-crisis months we find additional evidence of exposure. Although the value of exposure does not change with the size of the exchange rate movement, we find some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates. All told, we find about 1 in 4 firms' returns is significantly affected by movement in the exchange rate between 1995 and 1999.

Keywords: Foreign; exchange; rates (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-ifn and nep-rmg
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Citations: View citations in EconPapers (5)

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