Röthig, Andreas ; Semmler, Willi ; Flaschel, Peter (2008)
Hedging speculation, and investment in balance-sheet triggered currency crises.
Report, Erstveröffentlichung
Kurzbeschreibung (Abstract)
This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an open economy with a flexible exchange rate regime. Firms use currency futures contracts to manage their exchange rate exposure – caused by balance sheet effects as in Krugman (2000) – and therefore their investments’ sensitivity to currency risk. We find that, depending on whether futures contracts are used for risk reduction (i.e., hedging) or risk taking (i.e., speculation), the implied magnitudes of recessions and booms are decreased or increased. Corporate risk management can therefore substantially affect economic stability on the macrolevel.
| Typ des Eintrags: | Report |
|---|---|
| Erschienen: | 2008 |
| Autor(en): | Röthig, Andreas ; Semmler, Willi ; Flaschel, Peter |
| Art des Eintrags: | Erstveröffentlichung |
| Titel: | Hedging speculation, and investment in balance-sheet triggered currency crises |
| Sprache: | Englisch |
| Publikationsjahr: | 2008 |
| Ort: | Darmstadt |
| Reihe: | Darmstadt Discussion Papers in Economics |
| Band einer Reihe: | 168 |
| URL / URN: | http://tuprints.ulb.tu-darmstadt.de/4765 |
| Zugehörige Links: | |
| Kurzbeschreibung (Abstract): | This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an open economy with a flexible exchange rate regime. Firms use currency futures contracts to manage their exchange rate exposure – caused by balance sheet effects as in Krugman (2000) – and therefore their investments’ sensitivity to currency risk. We find that, depending on whether futures contracts are used for risk reduction (i.e., hedging) or risk taking (i.e., speculation), the implied magnitudes of recessions and booms are decreased or increased. Corporate risk management can therefore substantially affect economic stability on the macrolevel. |
| Freie Schlagworte: | Mundell-Fleming-Tobin model, foreign-debt financed investment, currency crises, real crises, currency futures, hedging, speculation |
| URN: | urn:nbn:de:tuda-tuprints-47659 |
| Zusätzliche Informationen: | JEL Classification: E32, E44, F31, F41; Erstellt März 2006 |
| Sachgruppe der Dewey Dezimalklassifikatin (DDC): | 300 Sozialwissenschaften > 330 Wirtschaft |
| Fachbereich(e)/-gebiet(e): | 01 Fachbereich Rechts- und Wirtschaftswissenschaften 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete > Fachgebiet Makroökonomie und Finanzmärkte |
| Hinterlegungsdatum: | 31 Jan 2016 21:00 |
| Letzte Änderung: | 25 Okt 2023 09:35 |
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