Exchange rate regimes and foreign exchange exposure: The case of emerging market firms

Min Ye, Elaine Robyn Hutson, Cal Muckley

    Research output: Contribution to journalArticleResearchpeer-review

    14 Citations (Scopus)

    Abstract

    We investigate the influence of exchange rate regimes on the foreign exchange exposure of emerging market firms. Using a sample of 1523 firms from 20 countries for the period December 1999 to December 2010, we find that about half of the firms are significantly exposed to exchange rate fluctuations. We find that non-floating exchange rate arrangements are associated with more widespread exposure as well as a greater magnitude of firms exposure. Cross-sectional analyses suggest that the exchange rate regime is an important determinant of firm-level exchange rate exposure for emerging market firms, and that pegged exchange rate regimes amplify exposure. This result holds after controlling for a wide range of potential determinants of firm-level and country-level foreign exchange exposure. Our findings suggest that exchange rate regime matters at the micro as well as the macro level; non-floating regimes fail to protect firms from exchange rate exposure.
    Original languageEnglish
    Pages (from-to)156 - 182
    Number of pages27
    JournalEmerging Markets Review
    Volume21
    DOIs
    Publication statusPublished - 2014

    Cite this

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    title = "Exchange rate regimes and foreign exchange exposure: The case of emerging market firms",
    abstract = "We investigate the influence of exchange rate regimes on the foreign exchange exposure of emerging market firms. Using a sample of 1523 firms from 20 countries for the period December 1999 to December 2010, we find that about half of the firms are significantly exposed to exchange rate fluctuations. We find that non-floating exchange rate arrangements are associated with more widespread exposure as well as a greater magnitude of firms exposure. Cross-sectional analyses suggest that the exchange rate regime is an important determinant of firm-level exchange rate exposure for emerging market firms, and that pegged exchange rate regimes amplify exposure. This result holds after controlling for a wide range of potential determinants of firm-level and country-level foreign exchange exposure. Our findings suggest that exchange rate regime matters at the micro as well as the macro level; non-floating regimes fail to protect firms from exchange rate exposure.",
    author = "Min Ye and Hutson, {Elaine Robyn} and Cal Muckley",
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    Exchange rate regimes and foreign exchange exposure: The case of emerging market firms. / Ye, Min; Hutson, Elaine Robyn; Muckley, Cal.

    In: Emerging Markets Review, Vol. 21, 2014, p. 156 - 182.

    Research output: Contribution to journalArticleResearchpeer-review

    TY - JOUR

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    AU - Ye, Min

    AU - Hutson, Elaine Robyn

    AU - Muckley, Cal

    PY - 2014

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    N2 - We investigate the influence of exchange rate regimes on the foreign exchange exposure of emerging market firms. Using a sample of 1523 firms from 20 countries for the period December 1999 to December 2010, we find that about half of the firms are significantly exposed to exchange rate fluctuations. We find that non-floating exchange rate arrangements are associated with more widespread exposure as well as a greater magnitude of firms exposure. Cross-sectional analyses suggest that the exchange rate regime is an important determinant of firm-level exchange rate exposure for emerging market firms, and that pegged exchange rate regimes amplify exposure. This result holds after controlling for a wide range of potential determinants of firm-level and country-level foreign exchange exposure. Our findings suggest that exchange rate regime matters at the micro as well as the macro level; non-floating regimes fail to protect firms from exchange rate exposure.

    AB - We investigate the influence of exchange rate regimes on the foreign exchange exposure of emerging market firms. Using a sample of 1523 firms from 20 countries for the period December 1999 to December 2010, we find that about half of the firms are significantly exposed to exchange rate fluctuations. We find that non-floating exchange rate arrangements are associated with more widespread exposure as well as a greater magnitude of firms exposure. Cross-sectional analyses suggest that the exchange rate regime is an important determinant of firm-level exchange rate exposure for emerging market firms, and that pegged exchange rate regimes amplify exposure. This result holds after controlling for a wide range of potential determinants of firm-level and country-level foreign exchange exposure. Our findings suggest that exchange rate regime matters at the micro as well as the macro level; non-floating regimes fail to protect firms from exchange rate exposure.

    U2 - 10.1016/j.ememar.2014.09.001

    DO - 10.1016/j.ememar.2014.09.001

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    EP - 182

    JO - Emerging Markets Review

    JF - Emerging Markets Review

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