Sources of timevarying exchange rate exposure

Authors: Christian Pierdzioch Renatas Kizys

Publish Date: 2010/03/09

Volume: 7, Issue: 4, Pages: 371-390

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Abstract

We report evidence of a timevarying link between returns on national stock market indexes and exchange rate returns exchange rate exposure We use this evidence to analyze the sources of changes over time in exchange rate exposure Using monthly data for 14 industrialized countries for the period 1975–2006 we report evidence of a cointegration relation between exchange rate exposure and the industry composition of a country’s imports and weaker evidence of a cointegration relation between exchange rate exposure and openness to tradePart of this paper was written during a visit of Renatas Kizys at Saarland University The hospitality of Saarland University is gratefully acknowledged We thank three anonymous referees for helpful comments We also thank participants of a seminar at the FraunhoferInstitut für Techno und Wirtschaftsmathematik Kaiserslautern for helpful comments The usual disclaimer applies

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