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Do Exporters Cut the Hedge? Who Hedges, When and Why?

Author

Listed:
  • Fabling, Richard

    (Reserve Bank of New Zealand)

  • Grimes, Arthur

    (Motu Economic and Public Policy Research)

Abstract
We use data derived from the Longitudinal Business Database (LBD) to analyse the currency denomination and hedging behaviour of New Zealand merchandise exporters. For instance: In which currencies are New Zealand merchandise exports by country of destination denominated? Do different types of firms (e.g. by size or sector) display different hedging practices? Does the "cost" of hedging (forward points) make any difference to hedging decisions? Is hedging consistent over the exchange rate cycle or do (some) exporters selectively hedge when the exchange rate reaches historical extremes? Has selective hedging been a profitable strategy for New Zealand exporters? Our results have implications for the capability of exporters to handle exchange rate volatility and for the potential impact of exchange rate volatility on exports.

Suggested Citation

  • Fabling, Richard & Grimes, Arthur, 2008. "Do Exporters Cut the Hedge? Who Hedges, When and Why?," Occasional Papers 08/2, Ministry of Economic Development, New Zealand.
    • Handle: RePEc:ris:nzmedo:2008_002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Wojakowski, Rafał M., 2012. "How should firms selectively hedge? Resolving the selective hedging puzzle," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 560-569.
    2. Gemma Mabin, 2011. "New Zealand's Exchange Rate Cycles: Impacts and Policy," Treasury Working Paper Series 11/01, New Zealand Treasury.
    3. Faruk Miguel L., 2016. "The use of foreign exchange derivatives by exporters and importers: the Chilean experience," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 19(3), pages 090-109, December.
    4. Enzo Cassino & David Oxley, 2013. "How Does the Exchange Rate Affect the Real Economy? A Literature Survey," Treasury Working Paper Series 13/26, New Zealand Treasury.
    5. Faruk Miguel Liriano, 2017. "The use of foreign exchange derivatives by exporters and importers: the Chilean experience," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43, Bank for International Settlements.

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    More about this item

    Keywords

    Hedging behaviour; exporting; exchange rates;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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