Röthig, Andreas ; Semmler, Willi ; Flaschel, Peter (2008)
Hedging speculation, and investment in balance-sheet triggered currency crises.
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| Item Type: | Report |
|---|---|
| Type of entry: | Primary publication |
| Title: | Hedging speculation, and investment in balance-sheet triggered currency crises |
| Language: | English |
| Date: | 20 November 2008 |
| Place of Publication: | Darmstadt |
| Series: | Darmstadt Discussion Papers in Economics |
| Series Volume: | 168 |
| Corresponding Links: | |
| 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. |
| Uncontrolled Keywords: | Mundell-Fleming-Tobin model, foreign-debt financed investment, currency crises, real crises, currency futures, hedging, speculation |
| URN: | urn:nbn:de:tuda-tuprints-47659 |
| Additional Information: | JEL Classification: E32, E44, F31, F41; Erstellt März 2006 |
| Classification DDC: | 300 Social sciences > 330 Economics |
| Divisions: | 01 Department of Law and Economics 01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > Fachgebiet Makroökonomie und Finanzmärkte 01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete |
| Date Deposited: | 20 Nov 2008 08:22 |
| Last Modified: | 25 Oct 2023 09:34 |
| URI: | https://tuprints.ulb.tu-darmstadt.de/id/eprint/4765 |
| PPN: | 378321579 |
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