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Article: Exchange Rate Risk and the Impact of Regret on Trade
Title | Exchange Rate Risk and the Impact of Regret on Trade |
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Authors | |
Keywords | Exchange rate risk Exporting Regret theory |
Issue Date | 2015 |
Publisher | Springer. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0923-7992 |
Citation | Open Economies Review, 2015, v. 26 n. 1, p. 109-119 How to Cite? |
Abstract | This paper examines the behavior of the regret-averse multinational firm under exchange rate uncertainty. Regret-averse preferences are characterized by a modified utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the conventional results that the multinational firm optimally produces less, sells more domestically, and export less abroad under uncertainty than under certainty holds if the multinational firm is not too regret averse. Using a simple binary model wherein the random spot exchange rate can take on either a low value or a high value with positive probability, we show that the conventional results may not hold, particularly when the multinational firm is sufficiently regret averse and the low spot exchange rate is very likely to prevail. |
Persistent Identifier | http://hdl.handle.net/10722/207769 |
ISSN | 2023 Impact Factor: 1.5 2023 SCImago Journal Rankings: 0.478 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Broll, U | en_US |
dc.contributor.author | Welzel, P | en_US |
dc.contributor.author | Wong, KP | en_US |
dc.date.accessioned | 2015-01-19T10:24:45Z | - |
dc.date.available | 2015-01-19T10:24:45Z | - |
dc.date.issued | 2015 | en_US |
dc.identifier.citation | Open Economies Review, 2015, v. 26 n. 1, p. 109-119 | en_US |
dc.identifier.issn | 0923-7992 | - |
dc.identifier.uri | http://hdl.handle.net/10722/207769 | - |
dc.description.abstract | This paper examines the behavior of the regret-averse multinational firm under exchange rate uncertainty. Regret-averse preferences are characterized by a modified utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the conventional results that the multinational firm optimally produces less, sells more domestically, and export less abroad under uncertainty than under certainty holds if the multinational firm is not too regret averse. Using a simple binary model wherein the random spot exchange rate can take on either a low value or a high value with positive probability, we show that the conventional results may not hold, particularly when the multinational firm is sufficiently regret averse and the low spot exchange rate is very likely to prevail. | en_US |
dc.language | eng | en_US |
dc.publisher | Springer. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0923-7992 | en_US |
dc.relation.ispartof | Open Economies Review | en_US |
dc.rights | The original publication is available at www.springerlink.com | en_US |
dc.subject | Exchange rate risk | - |
dc.subject | Exporting | - |
dc.subject | Regret theory | - |
dc.title | Exchange Rate Risk and the Impact of Regret on Trade | en_US |
dc.type | Article | en_US |
dc.identifier.email | Wong, KP: kpwong@econ.hku.hk | en_US |
dc.identifier.authority | Wong, KP=rp01112 | en_US |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1007/s11079-014-9321-0 | en_US |
dc.identifier.scopus | eid_2-s2.0-84939894656 | - |
dc.identifier.hkuros | 242206 | en_US |
dc.identifier.volume | 26 | en_US |
dc.identifier.spage | 109 | en_US |
dc.identifier.epage | 119 | en_US |
dc.identifier.isi | WOS:000347530700005 | - |
dc.identifier.issnl | 0923-7992 | - |