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Corpprat Hedging

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informes y estudios especiales

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orporate risk management and exchange rate volatility in Latin America
Graciela Moguillansky

Office of the Executive Secretary

Santiago, Chile, March 2003

This document was prepared by Ms. Graciela Moguillansky, Economist, as part of the United Nations University/World Institute for Development Economics Research-Economic Commission for Latin America and the Caribbean (UNU/WIDER-ECLAC) project on “Capital Flows to Emerging Markets since the Asian Crisis”, co-directed by Ricardo Ffrench-Davis, Principal Regional Adviser of ECLAC and Professor of Economics, University of Chile, and by Professor Stephany Griffith-Jones. The idea of examining the macroeconomic impact of currency risk management by multinational companies was suggested by Stephany Griffith-Jones, and this document has benefited from stimulating conversations with her throughout its development. The views expressed herein are those of the author and do not necessarily reflect the views of the Organizations.

United Nations Publication LC/L.1823-P ISBN: 92-1-121396-7 ISSN printed version: 1682-0010 ISSN online version: 1682-0029 Copyright © United Nations, March 2003. All rights reserved Copyright © UNU/WIDER 2002 Sales No. E.03.II.G.28 Printed in United Nations, Santiago, Chile

CEPAL – SERIE Informes y estudios especiales

No 9

Contents

Abstract ........................................................................................ 5 Introduction ....................................................................................... 7 I. Foreign direct investment and capital flows volatility.... 9 II. Foreign exchange risk management of multinational firms ................................................................. 11 A. A typology of financial strategies in currency risk management......................................................................... 12 B. Statistics in derivative markets...