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Article: Transparency and Risk Sharing in International Trade

TitleTransparency and Risk Sharing in International Trade
Authors
Issue Date2014
PublisherJohn Wiley & Sons, Ltd..
Citation
The Manchester School, 2014, v. 82, p. 716-731 How to Cite?
AbstractThe paper examines the impact of uncertainty on the decision problem of an international firm. The uncertainty under which the firm decides on home and foreign supply is affected by an information system that conveys public signals about the random spot exchange rate. The transparency in the foreign exchange market is defined by the informativeness of the information system. Our notion of transparency thus proposes an information-based concept of uncertainty. In this setting, we revisit the link between the transparency in the foreign exchange market and the behavior of the international firm. While more transparency may lead to higher or lower domestic sales and foreign exports, we show that the firm's expected profits always go up. The welfare of domestic consumers, by contrast, may increase or decrease with higher transparency in the foreign exchange market.
Persistent Identifierhttp://hdl.handle.net/10722/206841

 

DC FieldValueLanguage
dc.contributor.authorBroll, Uen_US
dc.contributor.authorEckwert, Ben_US
dc.contributor.authorWong, KPen_US
dc.date.accessioned2014-12-02T10:13:30Z-
dc.date.available2014-12-02T10:13:30Z-
dc.date.issued2014en_US
dc.identifier.citationThe Manchester School, 2014, v. 82, p. 716-731en_US
dc.identifier.urihttp://hdl.handle.net/10722/206841-
dc.description.abstractThe paper examines the impact of uncertainty on the decision problem of an international firm. The uncertainty under which the firm decides on home and foreign supply is affected by an information system that conveys public signals about the random spot exchange rate. The transparency in the foreign exchange market is defined by the informativeness of the information system. Our notion of transparency thus proposes an information-based concept of uncertainty. In this setting, we revisit the link between the transparency in the foreign exchange market and the behavior of the international firm. While more transparency may lead to higher or lower domestic sales and foreign exports, we show that the firm's expected profits always go up. The welfare of domestic consumers, by contrast, may increase or decrease with higher transparency in the foreign exchange market.en_US
dc.languageengen_US
dc.publisherJohn Wiley & Sons, Ltd..en_US
dc.relation.ispartofThe Manchester Schoolen_US
dc.titleTransparency and Risk Sharing in International Tradeen_US
dc.typeArticleen_US
dc.identifier.emailWong, KP: kpwong@econ.hku.hken_US
dc.identifier.authorityWong, KP=rp01112en_US
dc.identifier.doi10.1111/manc.12042en_US
dc.identifier.hkuros241485en_US
dc.identifier.volume82en_US
dc.identifier.spage716en_US
dc.identifier.epage731en_US

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