Resource title

Corporate Currency Hedging and Currency Crises

Resource image

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Resource description

We examine the impact of corporate currency hedging on economic stability by introducing hedging activity in a Mundell-Fleming-Tobin framework for analyzing currency and financial crises. The ratio between hedged and unhedged firms is modelled depending on firm size as well as hedging costs. The results indicate that, with an increasing fraction of hedged firms in an economy, the magnitude of a crisis decreases and from a specific hedging level onwards currency crises are ruled out. In order to improve corporate risk management access to hedging instruments should be made possible and hedging costs should be reduced.

Resource author

Andreas Röthig, Willi Semmler, Peter Flaschel

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22530

Resource license

Adapt according to the presented license agreement and reference the original author.