Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/156374
Authors: 
Tscheke, Jan
Year of Publication: 
2016
Series/Report no.: 
Munich Discussion Paper 2016-18
Abstract: 
Exchange rate exposure of firms diminishes when imported intermediates and exports are denominated in currencies that move together. Appreciations of the domestic currency, raising foreign currency export prices, then also reduce marginal costs, allowing firms to counter the increase in foreign prices. Using firm-level data from seven European countries I estimate a structural model showing how exchange rate pass-through into sales depends on intermediate imports and the co-movement of export and import related exchange rates. I find that operational hedging requires firms to intentionally choose export and import regions with comoving currencies. Analyzing the locational choice of firms confirms that the co-movement of currencies indeed appears to be taken into consideration
Subjects: 
Hedging
Offshoring
Intermediate Imports
Foreign Sourcing
Exporter
Effective Exchange Rates
Pass-Through
Disconnect Puzzle
Exchange Rate Co-Movement
JEL: 
D21
D22
F12
F14
F31
G15
L21
L23
L25
M16
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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