Dance with the Dollar: Exchange Rate Exposure of the German Stock Market

Entorf, Horst; Jamin, Goesta

doi:10.2139/ssrn.341320

Cited by 5 publications

(1 citation statement)

References 30 publications

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“…While very little of the work on exposure has attempted to shed light on the decline in pass-through, there are two exceptions: Glaum et al (2000) and Entorf and Jamin (2002). These papers find an increase in exposure of German firms in the 1990s as would be expected if passthrough declined in the 1990s.…”

Section: Discussionmentioning

confidence: 99%

Exchange Rate Pass-through to U.S. Import Prices: Some New Evidence

Marazzi

Sheets

Vigfusson

et al. 2005

internationalfinance

118

105

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This paper documents a sustained decline in exchange rate pass-through to U.S. import prices, from above 0.5 during the 1980s to somewhere in the neighborhood of 0.2 during the last decade. This decline in the pass-through coefficient is robust to the measure of foreign prices that is included in the regression (i.e., CPI versus PPI), whether the estimation is done in levels or differences, and whether U.S. prices are included as an explanatory variable. Notably, the largest estimates of pass-through are obtained when commodity prices are excluded from the regression. In this case, the pass-through coefficient captures both the direct effect of the exchange rate on import prices and an indirect effect operating through changes in commodity prices. Our work indicates that an increasing share of exchange rate pass-through has occurred through this commodity-price channel in recent years. While the source of the decline in passthrough is difficult to pin down with certainty, our work points to several factors, including the reduced share of (commodity-intensive) industrial supplies in U.S. imports and the increased presence of Chinese exporters in U.S. markets. We detect a particular step down in the passthrough coefficient around the time of the Asian financial crisis and document a shift in the export pricing behavior of emerging Asian firms around that time.

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Section: Discussionmentioning

confidence: 99%

Exchange Rate Pass-through to U.S. Import Prices: Some New Evidence

Marazzi

Sheets

Vigfusson

et al. 2005

internationalfinance

118

105

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Exposure to Exchange Rate Risk and Competitiveness: An Application to South-Eastern Europe

Horobeț

Shivarov

Belaşcu

2017

Contributions to Economics

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Exporters’ Exposures to Currencies: Beyond the Loglinear Model*

Boudt

Liu²,

Sercu

2015

Review of Finance

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We extend the constant-elasticity regression that is the default choice when equities’ exposure to currencies is estimated. In a proper real-option-style model for the exporters’ equity exposure to the foreign exchange rate, we argue, the convexity of the relationship implies that the elasticity should depend on the exchange rate level. For instance, it should shrink to zero when the option to export becomes worthless, and that should happen at a critical exchange rate that is still strictly positive. We propose a class of tractable multi-regime regression models featuring, in line with the real-options logic, smooth transitions and within-regime dynamics in the foreign exchange exposure. We then analyze the exchange rate exposure of Chinese exporting firms and find that the model in which the moneyness of the export option has a positive impact on the exchange rate exposure detects a significantly positive and convex exposure for 40% and 65% of the firms depending on whether the market return is included in the regression or not.

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Dance with the Dollar: Exchange Rate Exposure of the German Stock Market

Cited by 5 publications

References 30 publications

Exchange Rate Pass-through to U.S. Import Prices: Some New Evidence

Exchange Rate Pass-through to U.S. Import Prices: Some New Evidence

Exposure to Exchange Rate Risk and Competitiveness: An Application to South-Eastern Europe

Exporters’ Exposures to Currencies: Beyond the Loglinear Model*

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