The Firm, Exchange Risk and Political Risk: A General Approach
The firm involved in international business encounters a unique set of risks. The timing of changes in both exchange rates and in exchange controls is unknown. Governments announce that they will not change their parities, or that they will rely on floating exchange rates for the indefinite future, or that they will not adopt or alter their exchange controls, or that the property rights of foreign firms will be respected. Such commitments may be maintained — for a time. But national monetary policies and national politics are in more or less continuous flux; governments come and go, and successor regimes may not feel bound by the commitments of their predecessors — and even by their own commitments.
KeywordsExchange Rate Exchange Risk Risky Asset Foreign Currency Individual Investor
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