Firm strategy and economic exposure to foreign exchange rate movements

This study examines the implications of differences in strategy and industry structure for firms' economic exposures to foreign exchange rate movements. In contrast with previous research using a single currency proxy, this study estimates firms' exposures using a multiple currency model. The empirical evidence from U.S. manufacturing firms indicates that 13 to 17 percent of firms are exposed to foreign exchange rate movements. Results from cross-sectional analyses reveal that foreign direct investment reduces economic exposure to foreign exchange rate movements.