The Exchange Rate Exposure of a Global Competitor

This paper analyzes the exposure of operating cash flowing to an exogenous exchange rate change for a firm operating internationally as a multimarket oligopolist (i.e., a “global” competitor) and facing demand that depends in a general way on the exchange rate. It is shown that exposure is the sum of a base case exposure identified in other studies and two other components: terms associated with exchange rate-induced demand shifts and terms associated with competitors’s reoptimization following the exchange rate shock. In general, the magnitudes of these additional terms are significant, especially in the presence of asymmetries across markets and firms. Numerical examples are provided that incorporate asymmetries corresponding to stylized facts about some U.S. markets and U.S. manufacturers.© 1990 JIBS. Journal of International Business Studies (1990) 21, 225–242

Exchange Rate Changes and the Distribution of Industry Value

This article investigates the simple, widely-held hypothesis that an exogenous real home currency depreciation enhances the competitiveness of home country manufacturers vis á vis foreign rivals. The study associates changes in competitiveness with redistributions of value within an industry. Daily and weekly data on redistributions of value are obtained from world financial markets. The study estimates the relationship between changes in exchange rates and redistributions of value within the world automobile and steel industries during the period 1978-87. The data generally do not support the notion that firms benefit competitively from a depreciation of the home currency. On the contrary, for large fractions of both industries, a depreciation of the home currency is associated with a significant decline in their share of industry value.© 1991 JIBS. Journal of International Business Studies (1991) 22, 619–649