【正文】 b. It is the relative price changes that ultimately determine a firm’s longrun exposure. 8 PART II. THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGES II. ECONOMIC CONSEQUENCES A. Transaction exposure 1. Onbalance sheet 2. Offbalance sheet 9 THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGES II. ECONOMIC CONSEQUENCES (con’t) B. Operating Exposure : real rate change 1. Pricing flexibility is key 2. Product differentiation 3. Substitution of inputs 10 THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGES II. SUMMARY The sector of the economy in which the firm operates。 B. sensitivity to exchange rate changes. 16 PART V. AN OPERATIONAL MEASURE OF EXCHANGE RISK V. NEED FOR A WORKABLE APPROACH A. Regression Analysis 1. Variables a. Independent: changes in parent’s cash flows b. Dependent: Average nominal exchange rate change. 17 AN OPERATIONAL MEASURE OF EXCHANGE RISK B. REGRESSION EQUATION approach based on the operational definition of the exchange risk faced by a parent or one of its affiliates: a pany faces exchange risk to the extent that variations in the dollar value of the unit’s cash flows are correlated with variations in the nominal exchange rate 18 AN OPERATIONAL MEASURE OF EXCHANGE RISK where CFt = CFt CFt1 and CFt is the dollar value of total affiliate(parent)cash flows in period t EXCHt = EXCHt EXCHt1 equals the average nominal exchange rate during period t u = a random error term ttt uEXCHaCF ??? ?