Resolving the Exposure Puzzle; The Many Facets of Exchange Rate Exposure. FDIC Center for Financial Research Working Paper, No. 2007-07

摘要

Theoretical research suggests firms should have significant exchange rate exposure. However, empirical research has not documented such a relation. We extend prior theoretical results to model a global firms exchange rate exposure. Using this model and a global sample of 1,161 manufacturing firms from 16 countries, we show empirically that firms pass part of currency changes through to customers, utilize operational hedges (e.g., matching foreign sales with foreign production), and employ financial risk management strategies. For a typical firm pass-through and operational hedging each reduce exposure by 10% to 15% and financial hedging reduces exposure by 45% to 50%. The combination of these factors explains the low observed levels of exchange rate exposure.