Vehicle Currency Choice for Small Firm Exporters

This study offers short-term (1 to 3 months) and medium term (3 to 12 months) vehicle currency candidates to help small firm exporters hedge against US dollar value and volatility. A visual inspection of exchange rate trends, simple linear regression, standard deviation and risk-adjusted value chang...

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Bibliographic Details
Published in:	The journal of applied business and economics 2009-11, Vol.10 (2), p.25
Main Authors:	Elbeck, Matt, Baek, Chung
Format:	Article
Language:	eng
Subjects:	American dollar Canadian dollar Central banks Currencies Currency Exporters Exports Foreign exchange rates International trade Market positioning Maximum likelihood method Small business Standard deviation Statistical analysis Stochastic models Studies Time series Volatility Yen
Online Access:	Get full text
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Summary:	This study offers short-term (1 to 3 months) and medium term (3 to 12 months) vehicle currency candidates to help small firm exporters hedge against US dollar value and volatility. A visual inspection of exchange rate trends, simple linear regression, standard deviation and risk-adjusted value change (RAVC) applied to seven major currency exchange rates over a six-month period (September 2008 to February 2009) favors the Japanese yen as the short-term vehicle currency. Using 10-year exchange rate data (April 1999 to February 2009), two time-varying volatility models; GARCH(1,1) and the Ornstein-Uhlenbeck process together with RVAC identify the Japanese yen, Canadian dollar and Swiss franc as medium-term vehicle currencies. Ongoing analysis to select short- and medium-term vehicle currencies benefits the small firm exporter by aligning selection with their time horizons and would ideally be a service of the United Nations, World Bank or the International Monetary Fund. [PUBLICATION ABSTRACT]
ISSN:	1499-691X