Do Exporters Cut the Hedge? Who Hedges, When and Why?

Richard Fabling and Arthur Grimes

No 08/2, Occasional Papers from Ministry of Economic Development, New Zealand

Abstract: We use data derived from the Longitudinal Business Database (LBD) to analyse the currency denomination and hedging behaviour of New Zealand merchandise exporters. For instance: In which currencies are New Zealand merchandise exports by country of destination denominated? Do different types of firms (e.g. by size or sector) display different hedging practices? Does the "cost" of hedging (forward points) make any difference to hedging decisions? Is hedging consistent over the exchange rate cycle or do (some) exporters selectively hedge when the exchange rate reaches historical extremes? Has selective hedging been a profitable strategy for New Zealand exporters? Our results have implications for the capability of exporters to handle exchange rate volatility and for the potential impact of exchange rate volatility on exports.

Keywords: Hedging behaviour; exporting; exchange rates (search for similar items in EconPapers)
JEL-codes: D21 O12 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2008-05
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Citations: View citations in EconPapers (5)

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