Emerging Market Exchange-Rate Exposure
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چکیده
We estimate the exposure of emerging-market companies to fluctuations in their domestic exchange rates. We use an instrumental-variable approach that identifies the total exposure of a company to exchange-rate movements, yet abstracts from the influence of confounding macroeconomic shocks. We find the impact of depreciations on emerging-market stock returns is overwhelmingly negative. Since we estimate the exchange-rate exposure of firms from different countries with a common set of instruments, we can make coherent comparisons of their determinants across markets. We find a firm’s foreign-currency debt outstanding is an important determinant of its exchange-rate exposure. JEL classification: G15, F31, F41, G12
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