2006–2010

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

Reprint No. 2007:29

Author(s): Richard Friberg, and Mattias GanslandtYear: 2007 Title: Journal of Finance Volume (No.): 62 (5) Pages: 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.


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

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

About the book

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To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

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