Show me your competitors and I will tell you if you are exposed: Market Structure and Foreign Exchange Exposure

Athanasios Andrikopoulos and Xeni Dassiou ()
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Athanasios Andrikopoulos: Hull University Business School, University of Hull

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

Abstract: We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets under imperfect competition. We model the exchange rate exposure of exporting firms operating within price and quantity settings where between and within competition co-exist. We show that these two forms of competition may act as opposing forces in terms of the impact of the exchange rate on the optimal prices (quantities) and profits in both Bertrand and Cournot models. Real and bilateral exchange rate exposure is empirically tested using stock price and profit data from twenty-two multinational firms from nine markets during 1984-2015.

Keywords: Oligopoly Market Structure; Differentiation; Firm Behaviour; Foreign Exchange; International corporate finance JEL classification numbers: L13; D21; D22; F31; G39 (search for similar items in EconPapers)
Date: 2016
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