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Title: Essays on exchange rate exposure and exchange rate pass-through
Author: Termprasertsakul, Santi
ISNI:       0000 0004 5372 6294
Awarding Body: University of Essex
Current Institution: University of Essex
Date of Award: 2015
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This thesis examines the effect of exchange rates on stock returns and domestic prices. Specifically, it comprises three essays which are two essays on exchange rate exposure and one essay on exchange rate pass-through. In Chapter Two the first essay presents a comprehensive treatment of exchange rate exposure across a large sample of 3,015 firms from 5 ASEAN economies for the period 2002-2012. We adopt the OLS framework of Jorion (1990) as a benchmark model and the GMM approach of Chue and Cook (2008), with the latter having the advantage of abstracting from the effects of the wider macroeconomic environment. Estimated by the OLS method, our findings yield country specific results with regards to firm value confirming the prevailing view that the value of Asian firms decreases when their local currency depreciates. However, on application of the GMM approach the average exchange rate exposure of nonbank and bank in Indonesia and Thailand overturn the OLS results yielding positive coefficients. Also, the one-lagged exchange rate can explain exchange rate exposure in some cases; this effect is likely to be country specific. According to the different business characteristics, a bank sub-dataset indicates that the foreign exposure of Asian banks shows a greater degree of exposure than nonbank companies do. In Chapter Three the second essay examines transaction and economic exchange rate exposure, and contributes by adopting a transformed regression method that is robust to the econometric problem of data overlapping. The transformed regression method is combined with rolling-window regression in order to examine the time variation in exchange rate exposure in four main industrialised economies during the period of 1990-2012. We find evidence that the firms that are significantly exposed to long-run exchange rate movements reduce by approximately seventy percent at a horizon of 5 years when estimated by the transformed regression method. Our findings also show the effect of the recent global financial crisis on the relationship between exchange rates and firm returns. In Chapter Four the final essay investigates the effect of inflation targeting on the rate of exchange rate pass-through (ERPT). Our ERPT model is based on new open-economy macroeconomics theory but is extended using the nonlinear and asymmetric distributed lags (NARDL) framework, which is suitable in examining asymmetric ERPT under different inflationary regimes. After an adoption of inflation targeting, our evidence reveals that the asymmetric zero pass-through is mainly captured in the long-run, particularly, in emerging countries. By contrast, symmetric zero pass-through is robust for all countries in the short-run. This suggests that asymmetries of depreciation and appreciation have no noticeable impact on consumer prices after central banks pursue inflation targeting. This phenomenon might be explained by the effectiveness of inflation targeting implementation.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available