Exchange rate risk analysis based on firm data: a global value chain perspective

DOI10.1155/2020/5096720MaRDI QIDQ2194601zbMATH OpenOpenAlexFDO

Authors Mimi Ning, Jianhong Qi

Publication date 26 August 2020

Published in Discrete Dynamics in Nature and Society (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2020/5096720

Mathematics Subject Classification ID

Actuarial science and mathematical finance (91G99)

Review text

Summary: This paper investigates whether firms' participation in the global value chain (GVC) weakens the exchange rate risk and its mechanism. Based on \textit{W. Powers} and \textit{D. Riker}'s [``Exchange rate pass-through in global value chains: the effects of upstream suppliers, US International Trade Commission, Washington, DC, USA: Office of Economics Working Paper (2013)] expanding exchange rate risk model, this paper matches data from China's refined input-output table, the customs database, and the industrial enterprise database from 2002 to 2009 to measure the firms' GVC forward linkages and backward linkages and therefore empirically tests the relationship between participation in the GVC and the exchange rate risk. The results show that participation in the GVC reduces firms' exchange rate risk through a ``comovement effect for forward linkages and a ``hedging effect for backward linkages; differences in a firm's position in the GVC affect the extent of reduction in the exchange rate risk. Encouraging firms to participate in the GVC and strengthening GVC relationship with high-income countries in particular play an important role in minimizing the exchange rate risk.

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• scientific article; zbMATH DE number 6781436

Cites work

• How do different exporters react to exchange rate changes?
• The Dynamics of Productivity in the Telecommunications Equipment Industry

Cited in

(1)

• Transferring and sharing exchange-rate risk in a risk-averse supply chain of a multinational firm

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