Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250728 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
Working Papers No. 21-11
Publisher: 
Federal Reserve Bank of Boston, Boston, MA
Abstract: 
This paper estimates the cash flow and real effects of currency mismatches generated by foreign-priced operations of French manufacturers. The value of transactions invoiced in foreign currencies is twice as sensitive to exchange rates as the value of transactions invoiced in the domestic currency. I aggregate foreign-priced operations to the firm level to build a shift-share measure of invoice currency mismatch. This measure outperforms any trade-weighted effective exchange rate index in explaining cash flows of trading firms. Large firms absorb valuation shocks in their balance sheet, and small exporters partially hedge their dollar-priced exports with dollar-priced imports. Only investment and payroll of small domestic-oriented firms are sensitive to invoice currency valuations. These results show how trade value sensitivities to currency fluctuations can coexist with the evidence of disconnect between exchange rates and real macroeconomic fundamentals.
Subjects: 
exchange rate sensitivity
currency mismatch
dollar-priced trade
JEL: 
F30
F31
F32
F34
F36
F40
F41
F42
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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