2006–2010

Exchange Rates and Cash Flows in Differentiated Product Industries: A Simulation Approach

Särtryck nr 2007:29

Författare: Richard Friberg och Mattias GanslandtÅr: 2007 Publikation: Journal of Finance Årgång (nr): 62 (5) Sidor: 2475–2502


How do exchange rate changes impact firms’ cash flows? We extend a simulation method developed in industrial organization to answer this question. We use prices, quantities, and product characteristics for differentiated products, coupled with a discrete choice framework and an assumption of price competition, to estimate marginal costs for all producers. Using a Monte Carlo approach we generate counterfactual prices and profits for different levels of exchange rates. We illustrate the method using the market for bottled water. Our results stress that even in a relatively simple market such as this one, different brands face very different exchange rate risks.


Referens:
Friberg, Richard och Mattias Ganslandt (2007), "Exchange Rates and Cash Flows in Differentiated Product Industries: A Simulation Approach". Journal of Finance 62(5), 2475–2502.

Aktuell forskare

Niklas Elert

Forskningsområden: Entreprenörskap och ekonomisk dynamik.

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