Department of Economics
This paper analyzes export production in the presence of exchange rate uncertainty under mean-variance preferences. We present the elasticity of risk aversion, since this elasticity concept permits a distinct investigation of risk and expectation effects on exports. Counterintutitive results are possible, e.g. although the home currency is revaluating (devaluating), exports by the firm increase (decrease). This fact may contribute to the explanation of disturbing empirical results.
Exchange rate risk, Trade, Elasticity of risk aversion, Mean-variance model, Devaluation
Source Publication Title
Link to Publisher's Edition
Broll, U., Wahl, J., & Wong, W. (2006). Elasticity of risk aversion and international trade. Economics Letters, 92 (1). https://doi.org/10.1016/j.econlet.2006.01.031