Risk preferences estimation of exporting firms under exchange rate uncertainty
Risk preferences estimation of exporting firms under exchange rate uncertainty
This note empirically analyses how exchange rate fluctuations affects firms’ optimal production and exporting decisions. A firm’s elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible utility function that incorporates all possible risk preferences, a unique structurally estimable equation is derived. Quantile regression method is used to estimate this equation and compute the risk aversion elasticities for a panel of Indian firms. This approach allows us to demonstrate how characteristics of exporters at the intensive margin varies with the level of elasticities across the conditional exchange rate distribution.
126-136
Broll, Udo
b1378af8-abfd-40c4-a152-d75d4af12233
Mukherjee, Soumyatanu
3eb37c57-3efd-4203-a81b-de3acad02811
Sensarma, Rudra
397dacd8-a14d-4bd1-b543-8dd9f26acd2d
1 February 2020
Broll, Udo
b1378af8-abfd-40c4-a152-d75d4af12233
Mukherjee, Soumyatanu
3eb37c57-3efd-4203-a81b-de3acad02811
Sensarma, Rudra
397dacd8-a14d-4bd1-b543-8dd9f26acd2d
Broll, Udo, Mukherjee, Soumyatanu and Sensarma, Rudra
(2020)
Risk preferences estimation of exporting firms under exchange rate uncertainty.
Scottish Journal of Political Economy, 67 (1), .
(doi:10.1111/sjpe.12226).
Abstract
This note empirically analyses how exchange rate fluctuations affects firms’ optimal production and exporting decisions. A firm’s elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible utility function that incorporates all possible risk preferences, a unique structurally estimable equation is derived. Quantile regression method is used to estimate this equation and compute the risk aversion elasticities for a panel of Indian firms. This approach allows us to demonstrate how characteristics of exporters at the intensive margin varies with the level of elasticities across the conditional exchange rate distribution.
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Accepted/In Press date: 1 April 2016
e-pub ahead of print date: 15 July 2019
Published date: 1 February 2020
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Local EPrints ID: 439283
URI: http://eprints.soton.ac.uk/id/eprint/439283
ISSN: 0036-9292
PURE UUID: e04d1096-35fc-4171-91de-fb09bed656db
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Date deposited: 07 Apr 2020 16:36
Last modified: 16 Mar 2024 07:19
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Author:
Udo Broll
Author:
Soumyatanu Mukherjee
Author:
Rudra Sensarma
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