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Transparency and Risk Sharing in International Trade
Author(s) -
Broll Udo,
Eckwert Bernhard,
Wong Kit Pong
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12042
Subject(s) - transparency (behavior) , welfare , economics , foreign exchange , information asymmetry , information sharing , international economics , business , microeconomics , monetary economics , industrial organization , international trade , market economy , computer science , computer security , world wide web
The paper examines the impact of uncertainty on the decision problem of an international firm. The uncertainty under which the firm decides on home and foreign supply is affected by an information system that conveys public signals about the random spot exchange rate. Our notion of transparency proposes an information‐based concept of uncertainty. In this setting, we revisit the link between the transparency in the foreign exchange market and the behavior of the international firm. The welfare of domestic consumers, in contrast, may increase or decrease with higher transparency in the foreign exchange market.