For currencies with highly developed forward markets a well-known separation theorem holds which implies that international firms fully hedge the exchange rate risk if the forward markets are unbiased. In this paper we present a model of a risk-averse firm when perfect hedging instruments are...

In this paper we study the impact of more transparency in the foreign exchange market on the <i>ex ante</i> expected volume of international trade. Transparency is measured by the informational content of publicly observable signals. These signals convey information about the use of policy instruments...

The paper studies the impact of more transparency on the risk-sharing opportunities in the foreign exchange market and the associated implications on <i>ex ante</i> welfare. Transparency is measured in this model by the informational content of publicly observable signals about exchange rate...