We thank Pierre Picard (the editor) and two anonymous referees for their helpful comments and suggestions. The usual disclaimer applies.
Transparency and Risk Sharing in International Trade
Article first published online: 31 OCT 2013
© 2013 The University of Manchester and John Wiley & Sons Ltd
The Manchester School
Volume 82, Issue 6, pages 716–731, December 2014
How to Cite
Broll, U., Eckwert, B. and Wong, K. P. (2014), Transparency and Risk Sharing in International Trade. The Manchester School, 82: 716–731. doi: 10.1111/manc.12042
- Issue published online: 22 OCT 2014
- Article first published online: 31 OCT 2013
- Manuscript Accepted: 26 AUG 2013
- Manuscript Received: 16 MAY 2012
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.