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Title:Export production under exchange rate uncertainty PDF Logo
Authors:Broll, Udo
Gilroy, B. Michael
Lukas, Elmar
Issue Date:2008
Series/Report no.:Dresden discussion paper series in economics 08/08
Abstract:Given that a multinational enterprise can react flexibly upon exchange rate movements, international trade flows may be interpreted as an option. An enterprise will opt to export if the profits obtained from exporting under given exchange rate developments are greater than if foreign subsidiary sales were opted. Naturally, given negative exchange rate scenario situations, an enterprise will choose not to export. By virtue of a favorable exchange rate situation it may be more advantageous to implement the flexibility given by the inherent option exercise privilege. Interestingly, even taking account of entrepreneurial risk aversion aspects of enterprises, it is demonstrated that situations characterized by enhanced exchange rate volatility may still lead to greater export trade volumes.
Exchange Rate Volatility
Risk Aversion
Real Option
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

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